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Support grows for SMEs to avoid cash flow crisis caused by late payment

Support grows for SMEs to avoid cash flow crisis caused by late payment

Being paid on time is the lifeblood for any business. A customer missing a payment can ripple across the business restricting cash flow, cause concern about the ability to settle your due invoices and meet regular obligations such as staff salaries, tax, PAYE and VAT payments.

You are not the only one suffering from these problems. At any one-time SMEs are owed £14bn in unpaid invoices. If those invoices were paid on-time the economy would be boosted by £2.5bn!

New moves to reduce overdue late payment burden

Receiving payment is a perennial issue as a Federation of Small Business survey found. More than 30% of payments due to SMEs are late, outstanding invoices average £6,142 and 37% of those being paid late suffer cash flow difficulties.

The government has recognised the problem and launched the Office of the Small Business Commissioner. Created by the Enterprise Act 2017, the Commissioner will tackle late payment and unfavourable payment practices in the private sector and make  recommendations in payment disputes between SMEs and larger businesses.

To try and prevent payment problems it is vital for SMEs be proactive. The range of accountancy and credit control software now available reduces the administrative burden.

They provide real-time financial information, including due and overdue payments, automate the mundane but necessary tasks to generate reminders to minimise the opportunities for customers to miss payment dates and give an overview of calculations of payments you are due to make. 

Using these tools helps to maintain a strong cash flow and allow you to focus on developing the business.

Concerns over VAT payments

One regular payment that most SMEs can't ignore is the quarterly VAT return. HMRC's strict payment dates and, in most instances, the need to cover VAT bills from invoices raised but not paid, can mean short-term cash flow issues with less working capital and a subsequent knock-on effect across a business.

In such circumstances it can be tempting to miss the due payment - but beware. HMRC has strong powers including seizing assets to the value of the amount due, disqualifying directors and even start winding-up proceedings.

The government recently stated that it is renewing its focus to ensure it receives all monies due and has already netted an extra 5% taking VAT receipts to £124bn a year.

Solutions to help manage cash flow

It is possible to ease the pressure of VAT payments, as well as other tax bills, by using a flexible financial solution from a specialist provider, such as Wesleyan Bank. Payments can be spread over 3-12 months which means greater control over cash flow and the flexibility and convenience to smooth the financial peaks and troughs.

Using alternative financial solutions will not impact on your existing banking provisions and give you a greater understanding of the overall financial position of the business meaning that capital can used to invest in, and grow, the business.

Wesleyan Bank's expert team will tailor a solution to your specific requirements. To find out more about VAT funding click here. Alternatively, please call the Wesleyan Bank team on 0800 980 9348.

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

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