A recent announcement from the Government asking for feedback from businesses on how to tackle late payments has been given a “5/10” rating from one of the UK’s leading specialists in bad debt prevention.

Ian Carrotte, Proprietor of ICSM Credit, said that: “While it’s great that late payments are (once again) in the Government’s sights, the business world has been talking about this for many years and it still hasn't been resolved. ‘A call for new evidence’ and promoting technology which will help counteract late payers doesn’t fill me with confidence that this is going to get properly sorted any time soon.”

Nearly 25% of UK businesses say that late payments are a threat to their survival, according to the Department for Business, Energy & Industrial Strategy’s own figures, while the Federation for Small Businesses maintain that tackling late payments could add £2.5 billion to the UK’s economy.

Many of the problems stem from very large companies demanding extended payment terms from smaller suppliers – and this, says Ian Carrotte, cascades down the supply chain.

“Not only does this keep money in the accounts of bigger companies at the expense of smaller ones, many of whom are paying bank charges to maintain that debt. It also enables businesses to keep racking up more and more credit when they have no means to pay.

“Carillion was a great example – it was paying suppliers months late and when it went down, it left them holding the baby.

“So many businesses are under so much financial pressure that thousands more will probably be driven to the wall by late payments before a proper platform is in place to sort it out.

“We’ve been saying for years that we need to adopt the way late payments are handled in Germany to make sure everyone in the supply chain gets paid promptly. The only losers will be dodgy businesses and the banks.

“And it needs to go beyond a ‘code’ which can be broken by unscrupulous companies prepared to bully suppliers without a penalty. This is a curse on honest businesses - and paying bills within a reasonable timeframe needs to be embodied in the legal framework.

“Companies who are continually paying late are probably disguising the fact that they don’t have the assets to be trading at all – and at some point they are going to crash. If the Government, which claims to be the party of business, can be persuaded to act quickly, they will help weed companies that are effectively trading illegally out of the system.”

So can companies do anything before more protection is in place?

“Absolutely,” maintains Mr Carrotte.

“For a start, keeping regular tabs on your clients – even the ‘safe’ ones – should be paramount. No business is too big to fail… how many good companies have been dragged down by a well-known name going to the wall? ICSM’s monitoring system – which relies in part on input from companies in the print and haulage sectors among others – flags up businesses which are starting to delay payments or appear to be running close to the wire, before crunch time.

“If they are paying one supplier late, they’re probably going to do the same to you – and an early warning could be invaluable to head off problems at the pass.

“Secondly, while there’s always going to be an element of anxiety about pushing your customers to keep to your terms, if they start delaying payments then there’s almost certainly a cash flow problem that they’re not admitting to. Don’t let yourself be strung along. Be professional about the way you tackle it - but be firm. Good customers appreciate that sort of consistent credit management.

“Yes, you might lose the odd customer, but fortunately, with the ICSM monitoring service we can pick up on companies that are flitting from supplier to supplier to get their work done without paying old bills - and we share that data. 

“So, my third piece of advice is this: if a new company comes to you asking for credit terms, check them out first – no matter how big they are or how desperate you are for the work.”