Partner Article

Businesses impose stricter cash controls

North East businesses are imposing stricter cash and credit control procedures to prevent late payments damaging cashflow.

During the last ten months the average time it took for businesses to collect payments fell from 52 to 49 days, on combined sales of £6.7 billion.

Despite this, many firms are still worried about the detrimental effects late payments could have on their businesses. According to a survey by Yorkshire Bank, one in ten businesses believed that they would be forced to close or scale back operations if customers took more than 90 days to pay back invoices.

According to Sharon Mapplebeck, North East regional invoice partner or Yorkshire Bank, businesses have tightened up credit control procedures due to growing cash pressures and credit availability.

She commented: “All businesses, particularly SMEs, depend on healthy cash flow to pay staff, buy stock and keep on top of their own invoices and bills.

“Poor cash flow management can be one of the most critical issues that businesses face but we believe UK companies have listened to the advice to tighten up their systems and controls.”

Invoice finance lending in the UK and Ireland has increased by 7% annually, while in 2011 businesses using invoice finance saw an average 13% growth in sales.

Sharon continued: “Late payments and bad debts are a headache. They can affect the day-to-day running of a business and the sustainable growth of ambitious and profitable
companies.

’We are seeing more businesses taking out credit protection alongside their invoice finance facilities to mitigate losses from bad debts.“

She is now encouraging businesses to take simple measures to ensure cash flow procedures are as effective as possible, such as agreeing payment terms and conditions upfront, or using incentives for early payment.

“However, if late payments are a concern or are restricting cash flow, it is important to be rigorous about debt collection; recording conversations, possibly enlisting the services of debt collection agencies but ultimately looking for a swift resolution.” She added.

Business and Enterprise Minister, Mark Prisk is currently leading a campaign to reduce late payments which can have a critical impact on businesses, particularly SMEs. The UK Government recently extended its Prompt Payment Code, a code of conduct for all businesses to adhere to when it comes to payment and treatment of suppliers.

This was posted in Bdaily's Members' News section by Ruth Mitchell .