New figures released show that Small Business Debt Collection is needed more than ever.
It has long been known that Late Payments threaten the well being of Small Businesses. New invoicing app players ‘Tomato Pay’ claim that 84% of Small Businesses are currently suffering from late payments.
This is according to market research conducted on their behalf. The research also claims that 12% of Small Businesses wait more than 60 days for payment and 2% more than 90.
As a result of late or non payment, 33% of Small Business owners have been forced to pay themselves late or not at all. 17% state they have had to pay employees late also.
A quarter of Small Businesses are reported to have stated that Business late payment is hampering their ability to grow and recover from the pandemic.
Discourage late payment
Surprisingly, according to the findings, Small Business owners were asked what would discourage late payments. According to Tomato Pay, over half said they would be happy to offer discounts for customers to pay on time.
That seems highly unlikely and casts doubt over the integrity of the report say some.
Tomato pay’s founder and CEO Nicholas Heller said: “On average, small businesses issue 122 invoices every month – that is a whole lot of admin. Then, when you consider the fact so many are paid late – which causes stress, cash flow issues and jeopardises the business’ survival – it is clear to see why the process of creating and issuing invoices can be so frustrating for small business owners. They just want to get paid on time – that shouldn’t be too much to ask.”
“Tomato pay’s research also found that while small businesses are frustrated by late payments, they also begrudge how much time they spend on creating invoices in the first place.
“Almost half say creating invoices feels like ‘the wrong use of their time’ and resent how long they spend on it, with two thirds saying they wish they could spend less time on finances and more time running the business.”
“The majority (59%) say that if they could turn quotes directly into invoices it would save them time, rising to 72% for medium sized firms, while more than half (55%) think they’d be able to grow faster if they spent less time on the financial side of the business.”
Small Business Debt Collection action
If indeed the findings of Tomato Pay’s are correct, it highlights the need even more for Small Businesses to take action against unpaid invoices.
Chris Spencer of leading Small Business Debt Collection firm Federal Management said “In the current climate we would also advise to take some form of Small Business Debt Collection action and in some instances, it is imperative.”
“Thousands of Small Businesses collapse every month due to not being paid. Very often Small Business owners can be fearful of utilising a Debt Collection Agency as it may alienate their non paying customer, it shouldn’t be that way. There are very professional debt collection solutions available”
“We deal with all matters in a highly sensitive and Professional manner. A diplomatic approach is always adopted to ensure our client receives what they are rightfully owed. At the end of the day, Small Businesses need to take action where payment has not been received. What good is a customer that doesn’t pay?”
“Every enquiry we receive is taken on its own merit and we assess the situation on behalf of the clients best interests”
For many to compare debt collectors versus other well trodden ‘late payment’ combatting tactics such as using lawyers, is not an option. Debt Collection Agencies are very well versed in obtaining quick results from evasive customers.
Late payment hits new highs
Late payments are said to be at their highest rate since March. The Financial Services and Retail sectors top the charts for longest payment delays with a shocking 33% of all invoices going unpaid in September alone.
Trade Insurance giant Atradius has claimed they expect to see UK Business insolvencies climb to as much as 33% compared with pre-pandemic levels.
Contrary to initial expectations, the new Insolvency Forecast reports UK business insolvencies declined 27% in 2020 as a result of fiscal support schemes and anti-bankruptcy measures. As these measures continued in 2021, buffering businesses from the impact of the pandemic, insolvency rates have been kept artificially low. However, as fiscal support schemes are withdrawn, the report expects the long-awaited surge in insolvencies to be on the horizon, peaking in 2022.
The Insolvency Forecast warns UK business failures will begin to rise in H2 2021, resulting in a year-on-year increase of 7%. In 2022, annual insolvencies are forecast to spike by as much as 70% year on year. Analysis by Atradius economists of the latest forecast against a baseline insolvency level in 2019 reveals UK insolvencies will be 33% higher in 2022 than they were pre-pandemic – one of the highest rates in the world. Only Italy has a higher cumulative insolvency rate with a forecast increase of 34%, followed by the UK and Australia with a forecast increase of 33%.
However, the research warns that the sharp decreases in most countries also suggest potentially many so-called ‘zombie’ companies have been created whose financial situation is too weak to survive once economic circumstances return to normal. These zombie firms may be able to buy themselves time by running down their cash but Atradius economists expect them to materialise into bankruptcies within the four quarters of fiscal support ending.
The report details that the surge in insolvencies is shaped by three forces. First is the delayed effect of bankruptcies that would have occurred in 2020 in the absence of fiscal schemes and changes to insolvency proceedings. Secondly, the phasing out of support schemes is expected to trigger an increase of insolvencies towards ‘normal’ pre-pandemic levels. The third force is the elasticity of insolvencies to GDP changes, which has been effectively suspended throughout the pandemic to date.