By Maximilian Clarke

Late payments are a persistent problem for small and medium sized businesses in the UK.

More than three quarters of credit managers polled in a new Graydon UK survey do not believe that the Government is doing enough to protect businesses from the burden of late payments and the potential damage it can do to their finances.

According to the research, during Q4 2011 more than half of businesses have experienced an increase in late payment trade invoices trend. This is most common in private sector businesses with a turnover of up to £50m per annum. While the Government has announced that the recent EU Late Payments Directive, which standardises 30 day payment times, will be fast-tracked, it is uncertain whether this will be enough to reduce late payment and tackle this pressing issue.

Research also reveals that over the past year, 56 per cent of businesses have seen suppliers unilaterally change their payment terms. Meanwhile almost half of businesses predict that the impact of late payments could inhibit the ability to invest in people and services, it is important for businesses to put safeguards in place against late paying customers.

“With the Eurozone debt crisis already impacting the UK economy, it is concerning to see that two thirds of credit managers are worried about their cash flow and see late payments as a threat to their stability and growth over the next quarter and beyond," said Gordon Skaljak, External Spokesperson, Graydon UK. "Graydon UK has united with like-minded organisations to urge the Government to address the prevalent UK culture of late payment to prevent the critical damage it could cause to businesses.

“Running regular credit checks is vital for businesses and it will mean that businesses will be alert to any changes in their customers’ circumstances that could lead to non-payment in the future. Expecting customers to pay their bills on time because they have done so in the past can leave businesses vulnerable and so undertaking regular credit checks on customers is essential for protecting your business from bad debts, and ultimately, insolvency.

It’s also important that businesses build up a strong credit rating in order to be able to secure alternative sources of funding quickly should their cash flow take a hit. Bank lending remains challenging and there have been cases when lenders have withdrawn funding to businesses experiencing short term difficulties, causing them to dive into insolvency.”

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