Late payments and long-overdue invoices are causing havoc in the UK economy.
Government figures estimate that more than £23bn is currently owed to UK firms in outstanding invoices, and the problem is only getting worse as the time to pay continues to rise – now almost 31 days.
Fresh data from Time Finance has also shown how late payments are continuing to be a key headache for business leaders, with 75% worrying about cash flow as a direct result of overdue invoices.
Economic headwinds being faced by most sectors across all business sizes is certainly the major contributing factor, and 100% of SMEs now say their customers are paying late because of their own increasing overheads.
The FSB suggests that, as a result, some 400,000 businesses could be at risk of going bust.
Time Finance MD, Phil Chesham, commented: “Our research found that SMEs are owed on average £250k in outstanding invoices, and it’s no surprise that this is causing repercussions. This challenge simply isn’t sustainable for businesses.”
“Without cash in the bank, the bills aren’t paid and growth plans are put on hold and both of these are huge threats to any business.”
But what can organisations do to meet the challenge of late payments and proactively take steps to improve the situation?
Can technology help?
The scale of the issue and its importance to successful business hasn’t gone unnoticed in Whitehall. In its latest Payment and Cashflow Review, the government noted that; “Within the scope of the review is the role of technology-enabled accountancy platforms in tackling late payments and promoting a better understanding of prompt payment measures within the small business community.”
So in what ways can technology help when it comes to late payments?
One key way is through advances in automation and AI. For example, chasing overdue payments is costing SMEs nearly four hours of valuable time a week, something which modern platforms can automate.
Finance platforms are becoming better able to send invoice reminders and overdue notices, whilst AI can support business owners in understanding trends and certain customers who may be repeated offenders. Even simple evolutions, such as offering different ways to pay on each invoice, including ‘pay by card online’, are helping to speed up invoice settlements.
Aside from attempting to improve time to pay, integrated technology can also help business leaders and finance managers to understand future cash flows. Overdue invoices and knowing the average time-to-pay helps to better inform forecasts and identify any financial pinch points on the road ahead.
More advanced platforms are also taking the headache out of checking new potential customers too by running credit checks to assess risk levels – including existing customers where new issues might have arisen.
How to choose the right finance software for your business
Finance platforms are at the beating heart of the fight against late payments for individual organisations.
Accounting functionality is heavily ingrained within a finance platform, helping firms to keep track of invoices, quickly identify overdue unpaid invoices, and send out reminders encouraging customers to pay.
And the right finance tech can do so much more than make invoicing more efficient, from assisting with routine tasks and providing real-time data, to producing management reports and making annual accounts and auditing processes easier and more accurate.
We’ve created a free guide detailing the reasons why your organisation needs finance software, how to identify your own specific requirements, and how working with a partner like Phase 3 can help you realise the benefits of a market-leading platform without the headaches and stress associated with researching and onboarding a new solution.