SMALL BUSINESSES FACE CASH FLOW CRISIS

<div class="badge-base LI-profile-badge" data-locale="en_US" data-size="medium" data-theme="light" data-type="HORIZONTAL" data-vanity="daniel-hill-55409214" data-version="v1"><a class="badge-base__link LI-simple-link" >Daniel Hill</a></div>

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Small businesses are being urged to collect unpaid debt or could be forced out of business in a matter of months.

Speaking from his position as national chair of the Federation of Small Businesses (FSB), Mike Cherry warned that the pandemic has only served to exacerbate the issue of late payments. At a time where operating costs have soared, especially with the collapse of many energy providers, small businesses are particularly vulnerable.

Although the government’s decision to reinstate Plan A is a positive news for businesses, it brings to an end any extra financial support that the government may have been providing. Coupled with consumer spending being traditionally low in the months immediately following Christmas, it leaves businesses facing a potential cash flow problem.?

Last month, Economists from an international credit insurance and debt collection company warned that UK business insolvencies are projected to rise by a third. It is therefore more important than ever that small businesses take decisive action in the face of late payment. Whilst the FSB has urged big businesses and government organisations to adopt the prompt payment code as a norm and abide by its 30-day payment terms, smaller businesses are at the mercy of larger corporations until the code becomes mandate.

Many small business owners fear the consequences that may arise as a result of taking action against late-paying partners. At best, the professional pride of big businesses is hurt; at worst, future contracts are put at risk. Taking formal action to recover debt is no mean feat, but the alternative is to embrace the potential failure of your own business. For small-business owners who have invested a large proportion of their own time and money into the company, it’s not fair to be held hostage over withheld payment.

But let’s consider that the above assumptions are wrong. By choosing to outsource recovery of your late payments to a professional credit management company, it sends a clear message that you’ve exhausted all other avenues and have now sought the help of experts. Whilst the business or individuals in debt may not appreciate your decision, it paints a strong image that your business holds itself and its customers to high standards. The effects might even surprise you. By setting a precedent for the action you are prepared to take in the face of late payments, you make it clear to the debtor that their behaviour is irresponsible. Not only will this ensure that future business results in prompt payment, but you’ll likely gain a respect from the debtor that can only be gained through making such a strong move. Furthermore, you’ll strengthen your reputation as a company that holds social and financial responsibility at its core.

If you’re still unsure, why not consider white-label debt collection. Whilst you still outsource your debt recovery to an expert company, they will do this under your name and brand. This gives the impression that the process is still taking place in-house. This can be particularly effective – and reassuring – in situations where you fear a particularly negative reaction if they were to be approached by a third party. They will still take notice of the strong action you are taking to collect late payments, but it communicates your continued commitment to working with them rather than against them.

If late payments are hurting your business, contact Lawton Hathaway today. We have over a decade experience of consumer and commercial debt collection, including white label collection. Call us on 0161 441 0850 or visit our website.