In the U.K. alone, SMEs are owed £24 billion!
That’s an average of £27,000 per business.
Consider as well that the average SME business is waiting 39 days longer for payment, than the agreed terms of the contract. This figure is lengthening all the time and is unlikely to retreat until the national economy is well clear of the current economic downturn.
If you then apply the Statutory interest rate of 8%, the average SME is losing £2,160 per annum, if they do not claim the interest back from late payers.
Bookkeepers are able to make a significant contribution to their clients by bringing their attention to the potential loss to the business.
Fortunately the Late Payment of Commercial Debts Act (1998) enables businesses to, not only claim this interest from their late-payers, but also to claim a fixed compensation amount. As an example for a debt of £1500 the amount would be £70.
Often suppliers are only too happy to eventually receive the payment of an invoice. Especially if they have spent months worrying about whether it will be paid at all. If an invoice, for say £1500, is paid 6 months late, the SME will be relieved.
The SME is probably not even aware that they should have actually been paid £1,630, under the terms of the Act.
Of course it’s not always as straightforward as that. The SME may be nervous about compromising relations with customers. This is covered in an earlier related article to be found by clicking here.
The role of the bookkeeper can however suggest to the client, the potential lost revenue as a result of the late payments.