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Small Businesses Are Out of Pocket by £18.6 Billion: Recover it Quickly With Effective Credit Management

London, UK (10/12/2008)

It is estimated that small businesses (SMEs) are owed on average £30,000 each in late payments, which is crippling their cash flow. This is a massive figure that brings an immense strain to their finances which could be easily avoided. An effective system of credit control is essential to a small business’s survival, currently they suffer from more than 50% of their customers failing to pay on time; a problem that is becoming increasingly worse as people and business’s are struggling and are simply just delaying paying their bills. The recession is beginning to really bite and the smart small businesses are devising their survival plans.

Everyone knows that cash is king so the protection of its flow is crucial. SMEs are not only struggling under the late payments themselves but because of all the many repercussions they bring. A domino effect is being created; the late payments are only the first tile to topple leading all the way down to the last tile of insolvency. SMEs are finding they are now less able to borrow money to cover the deficit that the late payments bring and the costly time that is spent away from the business to chase their debtors, detracts from the performance of the business. 

A recession does not mean that business growth is not possible. In fact, there are many that have used their astute business minds to boom during the previous recession. Clever credit management will place them in the best position to do this. For example, many businesses do not perform credit checks on companies they deal with, the excitement of a large order will often cause them to overlook the possibility that the company may not actually be capable of paying, leaving a small company in a worse position than if they had never taken the order in the first place. An initial credit check on new customers would give businesses the opportunity to evaluate their ability to pay, protecting themselves against bad debtors.

There should be a clear payment system established with the customer from the beginning of the trading relationship, outlining the conditions and consequences of missed payments. To back this up, the business owners should have an up-to-date system of credit control running alongside a system that will analyse the data to show up when further action needs to be taken and in what form. The last resort of legal and debt recovery services is seldom used enough by small businesses who often do not know their rights in terms of charging interest either.

Simon Wood, Director at The Local Bookkeeper (TLBK), explains, “The benefit of an effective credit control system is huge to a small business. Credit Control systems are an efficient way to stay up to date with when you should expect payments, what level of pressure is currently being used to prompt them and when this should be intensified. If you are able to decrease the time every late-paying customer takes, then your cash flow will increase immensely in turn. Outsourcing good credit management is an easy and sure-fire way to improve your cash flow without taking any potentially profit-generating time away from your business.”

An experienced credit controller can play an essential role in small businesses, ensuring their cash flow is maintained without much effort on the part of the business owner. Many businesses are not aware of how to identify when they have a ‘bad debtor’ on their hands, let alone being able to handle one.  TLBK is offering a professional and efficient service to take the burden of credit control away from business owners. SMEs can be confident that everything possible is being done to ensure their cash flow is flowing at its expected level. With the muscle of an expert credit controller, the time debtors take to pay will be reduced and the number of debts you are forced to write-off altogether will be cut dramatically, giving power back to small businesses over their cash lifeline.


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