Cash Flow Pressures

Many small and medium sized companies (SMEs) are encountering late payment of debtor ledgers which in today’s financial climate can result in catastrophic repercussions in their own survival.

Recent research has indicated that even the first six months to July as many as 67% of companies have seen an increase in the time it takes their customers to pay outstanding bills.

You may also be encountering some of your larger clients demanding larger terms to pay or they take their business elsewhere, particularly pertinent if you are in a restricted market place.

It has been recorded that privately owned and limited businesses are the types of customers who are taking the longest to pay off their debts with corporates and listed companies not far behind.

Our experience is that many companies are in a catch 22 position, not wanting to pressurise clients to pay as competition in the market place is also great, but if they do not their bankers/borrowers are taking action which can result in administration.

Many directors find this very frustrating, as to extend borrowing results, in many cases, in an increase in interest and the spiral continues to turn.

Hidden costs also result as a result of late payments. Companies are having to spend more time chasing their debtors for payment. If you cannot get funds into the kitty then you will also have difficulty in meeting your debts as and when they fall due, again the downward spiral is escalating, the results being that in some parlances you are now insolvent, that being insolvent on the basis of not being able to discharge your debts as and when they fall due.

Should you not act properly at this stage you could infringe company law and ultimately be the named party in a wrongful trading investigation.

So act quickly, look after your debt, credit control is essential to the well being of your company. If you have outsourced your ledger to the invoice discount industry be aware that you need to collect the debts on their behalf otherwise the facility will be withdrawn and your business will not be able to continue.

At Marshall Peters Limited we will be only too happy to discuss any of the above issues with you, should you have cash flow problems do not hesitate to call for free independent advice of what is available to you as a director.