Anthony Thomas, partner at UHY Hacker Young in Wrexham, said: "These firms may be finding it hard to borrow at reasonable rates to tide them through cash flow problems. At the same time if just one or two of their clients leave them with a substantia
l bad debt it could threaten the survival of their business."
UHY recommends that small and medium sized companies consider adopting some of the following measures:
- Set a credit limit with customers. Use a credit reference agency for an overall report on customers' credit, but be aware that their ability to pay bills can change from one week to the next.
- Set out payment terms clearly to customers. Although you do not have to charge it, you could refer commercial customers to your statutory right to late payment interest from them – currently up to 13 per cent. See
www.payontime.co.uk- Organise your billing schedule and invoice at the earliest opportunity. Consider asking for a percentage payment in advance. If your goods are easily identifiable include a retention of title clause in the contract so that ownership only passes when payment is received in full.
- Review debtors regularly. If customers cannot pay the full amount at once, consider an initial part-payment, and try to agree a payment plan. Getting some money in soon is better than nothing at all and may be less of a hurdle to the customer.
- You could consider factoring or invoice discounting, i.e. assigning invoices to a third party. This can improve the reliability of cash flow. However, this does involve a fee.
- If your PAYE/NIC comes to less than £1,500 a month then you can arrange to pay quarterly rather than monthly.
- Start paying PAYE/NIC electronically through BACS. This allows you until the 22nd of the month or quarter to pay it, rather than the 19th. More details at
www.hmrc.gov.uk/howtopay/paye.htm. Payment of bills generally by BACS gives more control of when transactions go through your bank account compared to cheques.
- Avoid being charged interest or penalties on tax payments for your business by setting up a free reminder service using the Business Link website. Look under "key fil-ing dates" at www.businesslink. gov.uk.
- If the worst comes to worse and your customer goes into administration, make sure you contact the administrator to ensure they are aware of amounts owed to you.
The full article contains 441 words and appears in Evening Leader Wrexham newspaper.
