Small businesses are becoming increasingly concerned about the effect of late invoice payments on their cash flow.
And the late payments are a direct factor behind the rising amount of unpaid VAT across the UK, according to a Shropshire accountant.
Marie Bramwell; Operations Director, says figures have shown that UK businesses currently owe up to £2.6 billion in overdue VAT bills, and the numbers are continuing to grow.
“Businesses not being able to pay their VAT bills on time is a huge problem – and by having no alternative but to pay late, they are risking having their assets seized or their business shut down altogether.”
Marie says businesses should look for alternative finance options to find the cash they need so they could avoid late payment penalties.
“It’s important to familiarise yourself with the different options available in order to secure the finance you need for your business – there is no one-size fits all approach, every business is different and you need to explore the options to find which suits you best.
“If you’re chasing late bills, invoice financing may provide money based on the value of the unpaid invoices you have sent to clients.
“There are two different types: factoring allows finance providers to purchase the bill owed to you by clients and they are then responsible for collecting the debt. And discounting is where the provider will loan you a percentage of the value of your bill, but you will still be responsible for collecting overdue payments.”
She says businesses could also consider overdrafts as a short-term solution to cover unexpected payments.
“But it’s important you make sure that your business can pay back the funds before making any agreement with your bank. Bear in mind too that repayments are often made in instalments and interest may be charged on any outstanding debts.
“You could also decide to charge your client interest on any late payments – by law payments are considered late after 30 days for transactions where the client has received an invoice or delivery of goods or services.
“Don’t put your business at risk by being held to ransom by late payments. Take action as soon as possible to protect your company and your future.”
DY Director, Marie Bramwell