New research has lifted the lid on the country’s late payment crisis.
It’s stopping small businesses and the self-employed reaching their full potential – here’s what you can do about the problem.
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Small businesses are chasing £14.9 billion in late payments
Small business finance provider Liberis asked more than 440 small businesses about how late payments are hurting them. They found out that small businesses are currently owed £11,000 on average.
Taking the number of small businesses in the UK into account, Liberis claims small businesses across the country are potentially owed £14.9 billion in total. This is up almost £1 billion on figures released by Bacs Payment Schemes six months ago.
What’s more, the research revealed that not only are small businesses owed money, time spent chasing is costing them, too.
With 72 per cent of small businesses spending three days a month recovering debt, Liberis say this means small businesses are losing out on £5,300 a year on average.
Why are late payments such a problem?
The problems that late payment cause may unfortunately sound familiar. Strapped cash flow (and more time spent chasing payments) means that many are unable to invest in their business.
Fortunately, the government has recognised the problem. They’ve appointed Paul Uppal as Small Business Commissioner, who’s launched a new service to complain about late payments. He has the power to name and shame perennial late payers - but is it enough?
Uppal’s calling for more power to punish misbehavers, suggesting fines could deter firms from being tardy. In the meantime, read on to find out how to recover late payments effectively.
Late payment letter template - free PDF or Word download
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Late payment letter template - free download
Here’s a template for a simple ‘nudge’ letter, giving a reminder of the amount outstanding and due date.
How to recover late payments
If you’ve tried sending an initial email to your customer, but haven’t received anything yet, you can send a letter.
With any luck, you’ll only need to send one polite nudge. If that still doesn’t work, you may need to send a firm reminder – then, if all else fails, a final notice letter.
You can use our downloadable template above to make the process as easy as possible. You might need to edit it depending on your business and circumstances, but it lays out what to include.
You can also check out more tips on recovering unpaid debt.