It is encouraging to see Vince Cable continuing to support small to medium-sized enterprises (SMEs) that have to wait up to 180 days to be paid for goods and services provided to larger companies; particularly as figures from Bacs, the payment service, estimate that late payments have reached record highs of more than £36.5million.
The effect of late payments on the economy is devastating, from constraining investment to SME business failure and staff unemployment. But while Vince Cable’s words may be encouraging, implementing change will take time, so what can SMEs do to help themselves in the meantime?
One of the most important steps an SME can take is to present its invoices quickly and accurately. Combining the faster delivery of invoices with improved invoice accuracy, organisations not only ensure buyers receive the payment request sooner but also minimise the risk of delay-inducing problems.
Delivering the invoice by e-mail in a format that can be easily processed by the buyer and ensuring it includes every piece of required information — from purchase order number to bank account details — will enable buyers to match and approve the invoice data and process the payment more quickly. All these processes can be accelerated using document process automation and data transformation solutions.
With this in place, SMEs can exploit another key component of this process, the business to business Direct Debit (DD): enabling the company to collect a payment at a set point in time, providing enhanced predictability of inbound cash flow and improved working capital management.
Whilst UK business to business DDs have yet to take off due to the unlimited indemnity, the new Single Euro Payments Area (SEPA) DD is far more business friendly, with the limits in terms of indemnity and refund providing businesses with essential financial safeguards.
Adopting this model would provide SMEs with far more control: and it is now fundamentally important to align the UK DD scheme with the SEPA business to business DD scheme. There would be no need to change the infrastructure; simply changing the rules would enable businesses to exploit DDs immediately, transforming payment timescales, enabling suppliers to impose control and truly transform SME cash flow.
Product Marketing Manager, Payments
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