Good manners speeds up invoice payment
News19.07.2012 Comments (0)
The issue of late payment has been high on the business agenda in recent years, with many small firms struggling to stay afloat because of cashflow problems.
The government has acknowledged the problem and has called on UK companies to use electronic invoicing "where possible" to help speed up transactions and, ultimately, payments.
But numerous reports have shown that for many small businesses little has changed and they still have to wait long periods of time before being paid by big buyers.
So, aside from adopting digital processes, what can companies do to make sure they are receiving monies owed in a timely manner?
Well a new survey suggests that simply asking nicely can make a big difference. Credit checking agency Creditsafe found that 45% of businesses will settle invoices more quickly if they are asked to do so in a well-mannered way.
Of course it makes business sense for a large buyer to support their smaller suppliers, but paying on time or early could also have additional benefits in the form of discounts on goods and services.
"It is good to see that old fashioned good manners still have a place in the world of business," said Creditsafe's business development director David Knowles.
However, the carrot approach doesn't always work, and sometimes the stick is more effective, as the research seems to suggest.
Some 58% of firms will settle invoices more quickly if there are penalty clauses in place that will see them penalised for late payment.
For 48% the threat of legal action will prompt speedy settlement.
Mr Knowles said: "Penalty clauses seem particularly effective at encouraging payment and we may increasingly see firms introducing fines and late payment fees into the standard terms and conditions of contracts as a result of this research."
He added: "Late payment of invoices is the scourge of the economy; it drives firms to use expensive short term borrowing facilities and is responsible for an unacceptable number of business failures."