When The Federation of Small Businesses (FSB) published its quarterly Small Business Index (SBI) report in 2022, around 10% of 1,200 business owners surveyed said that late payments were threatening the viability of their business. Almost one in three had experienced more late invoice payments over the past three months - a precursor for a growing trend, which FSB warns could see half a million small firms collapsing in the next 12 months.
Since 2020, the pandemic has dramatically impacted organisations across the UK. Unsurprisingly, amid a timeline of business closures, furloughed staff and daily restriction announcements, even companies with the strongest track record for paying their invoices on time have had no choice but to fall back on bad payments practices. The FSB reported that cost pressures had hit a seven-year high in 2022.
Many people are all too familiar with the feeling when your personal finance commitments snowball out of control. The same thing can happen in business - a trend of regular late payments from customers or other stakeholders can soon lead to a disjointed cash flow that takes weeks, months or even years to repair. For small or medium businesses in particular the stakes are much higher, with less infrastructure, investments or financial safety nets to fall back on.
Failed payments could have adverse effects on your business credit rating - without collecting payments when they’re expected, paying your own invoices could soon prove difficult. Reputation is at risk too. A study by Barclays revealed that more than half of UK adults would boycott a business if they knew they were a late payment offender. Internally, healthy cash flow is essential for paying staff on time, or investing in necessary equipment and facilities to drive innovation and progression.
External factors such as inflation, increasing business rates and debt or changeable market conditions can’t be controlled. However, the way you process and manage your payments is one simple change that could stabilise your cash flow and mitigate the climate of ‘crisis’.
In our latest report we reveal a step-by-step guide on how digital payments can help to prepare your business for any cash flow challenges, saving staff time and unleashing numerous other business benefits.
Five tips to better manage digital payments:
- Automate communication - adding automated processes around communication offers the customer flexibility and saves time.
- Find an FCA-approved provider - being FCA approved ensures customers that their personal details will be secure.
- Look for sector-specific solutions – to meet specific business needs it requires a system that can provide solutions tailored to your business.
- Opt for an integrated system - using multiple spreadsheets can increase data risks for your customers and their information.
- Adapt to cloud-based software - being able to connect all systems seamlessly is crucial. When finding a provider, try to find one that is compatible with your current systems in order to have easier access.
Check out our other blogs for more business advice, or find out how to take your business to 100k in revenue.