Is Late Payment Going To Get Worse In 2022?

Let’s face it, the last few years have been incredibly challenging for business owners. 2020 and 2021 have seen the global pandemic go in waves, and many businesses have been struggling to keep their heads above water while their customer’s income declines along with their own. This has led to an enormous surge in late payments over the last 24 months, and sadly it doesn’t look like 2022 will get any better. But why is that, and is there anything you can really do about it?

Pandemic Problems

It’s safe to say that the number 1 cause of late or non-payment in the last 2 years has been the pandemic, and that’s one thing you nor anyone else has control over. But most businesses have been doing their best to get by, using a range of emergency measures of their own or put in place by the government. But now that a lot of that support is ending, the businesses that used them as a lifeline for the hard times are at a high risk of failure.

The statistics show that around 18,900 companies were spared going through insolvency proceedings because of government-backed measures like the Bounce Back Loan Scheme or the Coronavirus Business Interruption Loan Scheme. But in the last few months, the terms of these schemes have been ending, and now many businesses are having to make repayments before they’re in a financial position to afford to.

Until recently companies in financial distress because of the pandemic were protected from creditor action, but this scheme too is being phased out, and industry experts are predicting a huge spike in corporate insolvencies, with around 37,000 businesses expected to fold before 2023. And since HMRC has been awarded crown preference once again, that means they will be the frontrunner for reclaiming any money owed, and other creditors will be pushed to the back of the line. So the likelihood of being able to reclaim any money you’re owed by clients is significantly reduced.

Protecting Your Business From Late Payments

With all of that in mind, it’s never been more important to do everything you can to protect your business financially. There are a few different ways you can do this, including:

Improve Your Credit Control: There has never been a better time to tighten up your policies on who you are willing to extend credit to. Go through every client you have with a fine-toothed comb, and make sure you know who they are, their financial state and any other important information that could impact their ability to pay their invoices. You can do this using tools like credit reports, financial health checks and account opening forms in the beginning, and running regular checks throughout the course of your relationship. Staying on top of your credit management means you can spot the warning signs early if a customer is getting into trouble, and take action before it impacts your cash flow.

Get Everything in Writing: Get yourself a solid foundation and get everything in writing. Many businesses work on trust, which is commendable, but too much trust can be your downfall when it comes to payments. Make it a part of your standard invoicing procedure to let clients know exactly when their payments are due, and attach a copy of your terms and conditions in writing – and save a copy of that email. This means that your clients are never in any doubt about when their payments are due, and if you have to take matters further than a few prompting emails, you have a nice paper trail to fall back on.

Consider Outsourcing: A lot of our clients worry about chasing invoices and late payments, mainly because they don’t want to damage the relationship they have with their clients. And that’s very understandable. But chasing still needs to be done, otherwise, you might never get paid for the work you do. One of the ways around this fear is to outsource your invoicing. Invoice management companies, or even just a VA, can handle the creation and send out of your invoices, and the chasing as well. Because they are an external person you don’t need to worry about harming any relationships, and your clients are likely to take you more seriously and get their invoices paid if they are being issued and chased by a third-party company.

At Debtcol we work with businesses of all shapes and sizes to help them reduce the number of late payments on their books and reclaim any outstanding money from debtors where possible. We can also help you put processes in place, manage your pre-work checks and ensure you are in the best position possible to survive the pandemic and recovery phase and get back to fighting fit in no time. If you would like to know more, just get in touch with the team today to book your free consultation.