By Andy Stalsberg, Chief Commercial Officer at Access Paysuite.


The Federation of Self Employed and Small Business (FSB) recently revealed that nearly 80 per cent of businesses are dealing with the consequences of poor payment practices. When invoices aren’t paid promptly, or suppliers are left waiting for payment there can be serious consequences, significantly impacting a business’ ability to manage operating costs and pay employees.

But what steps can businesses take to help overcome the financial challenges of late payments?


Challenging macroeconomic events 

Since the start of the COVID-19 pandemic in 2020, there have been a number of economic factors impacting consumers and their level of disposable income. Issues such as rising inflation, unemployment, and fluctuations in economic growth, alongside the war in Ukraine, have created a period of economic instability. In fact, in May UK inflation hit a 40-year high of 9 per cent, presenting a number of challenges for businesses.


The issue of late payments 

Earlier this year, the FSB revealed up to 440,000 SMEs could be forced to close due to late payments alone and, whilst many large businesses have the assets to combat late payments, SMEs are undoubtedly starting to feel the consequences of the cost-of-living crisis.

Some SMEs may not have a wider knowledge of how to effectively tackle late payments, particularly when compared with larger companies with an experienced in-house finance team and extensive resources.

One of the main challenges created by late payments is the unforeseen drop in income, which often results in cash flow instability. For some businesses, this owed money might prevent them from being able to explore new opportunities such as recruiting and investing back into the business and in the worst case they might even be forced to close.

In fact, City A.M. revealed nearly one in four SME owners believe that delays in the payment of invoices have got worse within the past year, with the domino effect of late payments negatively impacting business operations and cash flow.


How technology can help businesses better manage payments

Automation is fast becoming the preferred method for businesses looking to improve their payment processes. With electronic invoicing, the previously laborious process can be made much simpler and more efficient.

Speeding up the payment process means customers will receive their invoices earlier and any disputes can be resolved faster. Similarly, this will help standardise the payment process from both the business’ and customer’s point of view.

During these challenging times, it’s crucial for businesses to adapt and provide flexibility for their customers. Giving multiple options such as flexible payment collection dates, the option of direct debit, or splitting of monthly payments into smaller increments ensures a higher prospect of receiving payments on-time.

Many businesses are not aware but engaging with a direct debit specialist can quickly improve your efficiencies and collection rates. In a short time, the service costs of using an expert provider will bring in  better cash flow and payment success.

A fully automated payments system will also provide an intuitive view of incomings and outgoings, meaning businesses can better forecast any upcoming payment issues and take the relevant steps to prevent this from becoming a larger problem. Those reliant on manual processes may find themselves, victims of costly human errors and oversights, should a late payment be missed this could have a significant impact on cash flow later down the line.

Whilst not only benefitting the business, a digital payments solution will also improve customer experience, with the majority of consumers finding digital interactions less stressful and more convenient.


Maintain positive cash flow

As mentioned above, with the right systems in place you can minimise the chance of late payments to improve and maintain positive cash flow. With a consistent source of income, businesses can reliably predict revenue streams.

Improving cash flow takes time, especially when facing debt or a backlog of late payments, but with a more robust payment system in place, these issues can be more easily rectified and resolved to boost opportunities for the business.

As the cost of living crisis continues, late payments will, sadly, only become more of a problem. With a fully integrated and flexible digital payment system in place, businesses can ease cash flow worries and focus on more value-add activities.


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