It’s always in election years that the UK’s late payment crisis appears prominently in the media. Every party, across the political spectrum, included some measure to alleviate the late payment burden in their manifesto.
It’s not hard to understand why when you look at the scale of the issue: at any given time, there’s about £2tn in outstanding payments out there just floating in the ether. Worldpay’s own research shows the worst late payment offenders are in HR, sales, media, utilities and marketing.
Chasing down late payers is a major headache for many small business owners and can result in severe cashflow issues. From the phone calls, to the chasing letters, the simple act of getting paid can be an enormous and unwelcome distraction from the day-to-day running of a business. Our research showed that small business owners spend roughly 20% of their time (equating to a full day each week) on such admin tasks, further reducing their ability to bring money in.
Across the UK, it’s usually the smallest or highly geared businesses that face the greatest challenge in managing this careful balancing act between doing the work and getting paid for it. Alex Ingham is typical of the kind of business owner who suffers the worst. Ingham is the founder and managing director of MI Supplies, a workwear business in the North East. The business employs 11 members of staff.
At one point, the late payment issue became so chronic that Ingham had to dip into a savings account he had set up for his son. "We had a dreadful run of late payers a while ago. It resulted in us paying the wages through our little boy’s savings account to keep everyone up to date.
“The majority of companies are never more than eight weeks away from going bust due to cashflow issues,” he says. “Not many small businesses will have two or more months' worth of reserves in the bank, so it’s so important that you get your revenues in as promptly as possible.”
Long-term solutions lie in building better processes that make both the act of paying and getting paid far simpler for all concerned.
There’s no guarantee that any business will succeed - but if a business doesn’t succeed then it should come down to the merits of its offering. That’s what makes the delayed payment problem such a frustrating issue.
Small businesses are turning over less and, in turn, they have to let down the people who rely on them. It is only right that the main political parties include provision to tackle this issue in their manifestos, but legislation is only ever likely to form part of the solution. Long-term solutions lie in building better processes that make both the act of paying and getting paid far simpler for all concerned.
Granted there are individuals and companies that consciously delay payment. Legislation has a role to play in making it prohibitive for these businesses to do so. But there is another issue here which legislation won’t tackle and that’s complexity. Most people want to pay their suppliers on time; it’s just that the processes involved to make that payment are often clunky and time-consuming. Make something difficult or cumbersome, and people tend to put off payment until a time when they’re less busy.
Ask yourself this though; when did you last consider yourself ‘less busy’? And then there are the times we simply forget to settle a bill, or mislay an invoice. It’s not malicious, but ultimately it all leads to the same thing – businesses not getting paid on time. This is where technology has an important role to play. Automated, affordable technology removes many of the barriers to late payment simply by making the whole process easier.
Services like Pay By Link allow businesses to include a ‘Pay Now’ button or link in emails. Customers simply click the link to pay electronically and securely using a credit card, debit card or PayPal.
A payment reminder becomes infinitely more powerful when it’s combined with an easy way to settle the payment itself. The steps between reading the reminder and making the payment are decreased dramatically. Ultimately, the goal is to eradicate the barriers to payment and, most crucially, to do it in a simple and efficient manner.
Utilising tech like this helps you save time chasing payments, and provides your customers with an easy and professional looking way to settle up in return for a job well done. Got an email account? Save yourself some hassle and start taking back control of your cashflow.
Worldpay is supporting BusinessZone's month-long focus on retail and ecommerce. To find out more about how Worldpay helps thousands of small businesses with secure online payments check out their website.
About James Frost
As Chief Marketing Officer of Worldpay's UK division, James is responsible for the development and management of all marketing across the UK and Ireland.
James has over ten years of experience in marketing and strategic direction. Before joining Worldpay, James was the UK's Marketing Director of the Nectar brand, overseeing the marketing direction of the UK's largest loyalty programme which included being responsible for customer marketing, partnership marketing, web and social media, public relations and strategic planning departments. Prior to this, James was in charge of brand communications and innovations for a European brand at Unilever.