Tradesmen and small businesses should forget about 30 days’ payment, according to Pimlico Plumbers founder Charlie Mullins.
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In an exclusive video for Simply Business, the plumbing magnate encouraged tradesmen to insist on payment on completion, rather than invoicing and waiting for payment.
“You’ve got to run a business under your terms,” he said. “If we did invoices and waiting for payment, we’d probably go bust, because we do 2,000 jobs a week. We just wouldn’t have enough dosh.”
The cost of late payment
UK SMEs are owed some £255 billion in late payments, according to figures released by Zurich last year. One in five respondents said they were owed more than £25,000, while one in 10 were owed more than £100,000.
A separate survey by Ormsby Street, published in June, suggested that half of freelancers have considered quitting freelance life because of worries over ageing invoices.
Figures published in October revealed that UK small businesses wait an average of 72 days to be paid, while SMEs spend around £10.8 billion every year to recover money owed.
Speaking to Simply Business, Mullins said: “We used to invoice people and they’d not pay you. There’s a simple way round that: lay your terms of business out, and our terms are payment on completion. Everybody that we work for, they pay us by cash, cheque, or credit card – not a problem at all.”
Sometimes, though, small businesses are forced to offer credit to clients and customers. In these cases, Mullins is clear: “If you are going to give credit, forget all this 30 days nonsense. Give it seven.”
Businesses of every size are now entitled by law to claim interest and debt recovery costs on late payment.
The statutory rate of interest on late payments is eight per cent over the Bank of England base rate, while flat fees for debt recovery can be charged on a sliding scale depending on the amount owed, from £40 for debts up to £999.99 up to £100 for debts of £10,000 or more.
Have you struggled with late payment? Let us know in the comments.