Half-a-million invoices overdue to North West companies 

In the last two months of last year, late payment problems for North West businesses eased somewhat, with figures from insolvency and restructuring trade body R3 showing the number of invoices owed to businesses in the region which were past the payment deadline fell from 830,465 in October to 573,372 in December. 

However, this followed a rise in the figure for the previous six months.  

Figures also show the number of North West companies which were themselves behind with their bills stood at nearly 60,000. 

Stuart Bell, accounting partner at accountants Dodd and Co, which has offices in Penrith and Carlisle, says a lot of the work necessary to avoid late payments needs to be done before an invoice is even sent. 

"One of the biggest things that you can do is actually put processes and systems in place prior to even considering late payments," says Stuart. 

Measures could include ensuring invoices are sent promptly, rather than waiting to send them out in batches.  

"If you do offer credit terms ensure that they are stated on your invoice and communicated with the customer as well," says Stuart.  

"You also need to set expectations from the start. A lot of businesses will tend to just send out an invoice and expect payments but it's important to have that regular communication. 

“It’s worth chasing regularly as well, so if you have 30 day terms then you can send reminders at the midway point after 15.”  

Learning when clients had their own payment runs can also help firms time their invoicing to match. 

“If you have regular monthly clients, you can almost take the problems out by setting up direct debits and standing orders,” says Stuart. 

For large orders and projects, Stuart says firms can ask for an upfront payment to cover their costs. 

“A lot of it comes down to concise communication at the start of your relationship; communicating your payment terms to customers and later down the line if payment isn’t possible, understanding why they might not be able to make payments and setting up a plan that can work for both parties,” he says.  

“If you are having issues with certain customers then you really shouldn’t be continuing to do work for them without having these conversations first.  

“Depending on the size of the business you may have a specific person that deals with credit control, which can help maintain relationships with customers. As a business owner it can sometimes be better for someone else to have that difficult conversation. 

"It is also quite a specialised skill in terms of putting the message across in the right manner.” 

If late payment problems persist, Stuart says companies can recourse to using invoice factoring - in which a third party pays the invoice and then chases the money in return for a percentage. 

Then, of course, there is the option of overdraft extensions or loans. 

“None of these are immediate,” says Stuart.  

"It's really important that you monitor your business cash flow and recognise any potential pressure points at a really early stage. That allows you to have a conversation with the accountant or with the business adviser and put the right measures in place at the right time.” 

Nick Kennon, director at Wragg Mark-Bell solicitors, in Carlisle, says the firm is beginning to see more examples of companies seeking its advice over how to deal with late payers.  

"We are starting to see people say they are concerned that invoices are not being paid and there's an increase,” he says. 

Nick says if the worst comes to the worst then the Small Claims Court can provide a recourse for those chasing amounts up to £10,000.  

However, he says everything should be done through mediation to avoid getting into this situation. 

Although the Small Claims Court is intended to be simple enough to avoid engaging a solicitor, if one is needed then the fixed costs it can impose may not cover the bill.  

An enforcement agency may also have to be paid to recover the money owed.  

If the person you are pursuing for the money is unable to pay or hard to locate then getting the funds you are owed - even if you are successful in court - may be a long and difficult process.  

 "There are many things you can do if you are proactive in debt management to avoid debts occurring, or actually managing them without having to go to court proceedings," he says.  

"It's about establishing communication. Is it something in the bill that they don't agree with? What is it and can it be resolved?” 

If a court claim is necessary, it is essential to have records of all the services or products supplied which you can supply as evidence. 

​​"If you're putting it down and saying ‘This is my version of the truth’ then you have to be able to prove it with witness or documentary evidence,” says Nick.  

R3’s North West chair Allan Cadman, who is also an insolvency practitioner with Xeinadin Group, says: “The drop in late payments could be due to a number of reasons. Since restrictions on issuing winding up orders expired in April, creditors have been actively pursuing debts and as cases work their way through the court process, we are seeing a big rise in the number of compulsory liquidations. 

“With the economic climate too, many companies are doubling down on credit control to protect their own cash flow. Given the rise in insolvencies, it could also be that some companies which were struggling to pay their bills have gone out of business. 

“Whatever the reason, we would hope that these figures are not just a temporary blip but reflect a longer-term trend. Late payment is a real challenge for businesses and can have a knock-on effect throughout the entire supply chain. 

“Businesses which are struggling to pay their bills on time should be aware that creditors are taking a tougher stance and should seek professional advice from an insolvency or restructuring professional rather than running the risk of legal action.”