Late payment culture adds to credit crunch woes

Late payment culture is adding to the existing headache caused by the credit crunch for small business, it has been claimed.

Research conducted by business finance firm Hilton-Baird found that almost half of small and medium-sized businesses are struggling to be paid on time by their customers.

According the report, small businesses are already finding their funding lines being ‘squeezed as the banks tighten their borrowing procedures’.

Alex Hilton-Baird, managing director of the firm said: “While the money markets will recover over time from the major losses incurred on the other side of the Atlantic, in the short to medium term this is likely to result in many UK [small firms] having to tighten their belts, particularly with customers continuing to pay late and if they haven’t already done so, review the way in which they currently finance themselves.”

Hilton-Baird advised small firms to make sure their terms and conditions were reviewed on a regular basis and that invoices were raised on time. He also suggested incentivising sales teams to sell to customers that are more likely to pay on time.

He added: “While increasing turnover is important it shouldn’t be at the expense of profitability.”

© Crimson Business Ltd. 2008