Suppliers refuse to wait as long to get paid
Private sector suppliers are putting cashflow concerns ahead of courtesy to clients by threatening them with legal action sooner rather than later over invoices that go unpaid, a debt recovery law firm says.
Sharing its third quarter data with CUK, Lovetts said that the average number of days between a business invoicing and pursuing its payment with a ‘letter before action’ has reduced, from 72 days to 68 days this year.
That means out-of-pocket firms are chasing and threatening late payers four days earlier, representing the third quarter in a row that suppliers’ patience, or willingness to not mention a legal claim, has deteriorated.
Increasingly, then, suppliers’ attitude is “debt is debt – no matter who the customer”, said Lovetts’ managing director, suggesting the “forbearance” many firms mustered up last year has “just about run its course.”
Charles Wilson explained: “This is quite a reversal on 2010 when businesses were giving customers much longer to pay before action was threatened, in a bid to maintain good relationships.
“[But] there is still much more room for businesses to sharpen up…It’s all well and good threatening legal action, but firms need to demonstrate they will pursue a claim through the legal system or they are in danger of crying wolf.”
Wanting to keep bad debt at bay and needing to stay profitable, or “afloat” in some cases, were cited as the likely motivators for suppliers getting tough on their creditors.
Letters warning the late-paying client of recovery action - and the extra cost under the late payment legislation, remain the most effective tool, with an 80% success rate in securing payment from the debtor.
But with the total amount of late commercial payments to SMEs at a new record - £33.6bn, according to payment body BACS last week, suppliers were told to show they “mean business,” when it collecting what they’re owed. Mr Wilson encouraged: “Businesses should not let their fear of losing customers or damaging relationships get in the way of taking a hard line on overdue invoices.”