Avoiding Bad Debts at Year End

Avoiding Bad Debts at Year End

It’s that time of the year again where many businesses start to think about their financial year end.

One area that your Auditors are going to be particularly interested in is the number of overdue invoices on your ledger at the end of the year.  They may well suggest that you make a provision for any invoices over 90 days  in your accounts. What this means is that your profits would be reduced by that amount. If you have not run a debtors report for a while you may be surprised at just how much is still waiting to be paid.  Depending on how much is overdue that could be quite a hefty sum coming off your bottom line!

With many companies aligning their year end with the calendar year, and with the holiday season to take into account, that means that there’s now less than six weeks to go till your customers do their final payment run of the year.  So now is the time to be following up on your unpaid invoices. All your customers will need contacting with swift action to resolve any issues to ensure you make that payment run on the 21st December.

Your staff may not have the time to do this which is where our short term credit control project services come in. We have helped many companies clear up their debtor books of old, slow moving payments.  So why not pass us your invoices over 60+ days to collect, so you can start next year with a fresh debtor book and post the best profits for this year?

It’s your money and profit after all!

Debt insurance claims rise

We’re always banging on about just how much money is owed to SMEs by late payers, but forgive us, as sorting it out is what we do and we are committed to helping to deal with the situation. The latest study by Previse, a Fintech business aimed at expediting prompt payment by large buyers, reckons that SMEs have had to take out £31.5 billion in funding to bridge the late payment gap. One in five companies are waiting more than 90 days for their bill to be settled and ¾ of them have had their company compromised because of late payment. This late payment culture is killing the competitiveness of UK business. It would be naive to think that extending terms with a supplier comes at zero cost. Prices will go up, suppliers will look elsewhere, the relationship gets soured and that benefits neither party. But as we stand, that’s the culture in many companies in the UK.

For those companies that can afford it, insuring yourself against this kind of sharp-practice and the risk that it leads to default is one way forward. But even that is now beginning to get harder and inevitably more expensive. The Association of British Insurers (ABI) have just reported that 2017 has had the largest number of pay-outs since the crash of 2009, a whopping £225 million. If you can’t get insurance for your customers credit risk or its just too expensive, then it will drive decision making and the ‘friction’ of doing business in only one direction. That has to be a bad thing for UK plc.

Against this background, it surely adds even more weight to putting these ‘sticky’ debts into the hands of professionals. If you don’t want to pay the insurers rates, or won’t even be considered by them, then as soon as a debt becomes due, even one day over term, pass it to a body like us to quickly and efficiently get your money for you. Its very cost effective, or even cost neutral, and the sooner we are engaged, the quicker you get your money, and the risks to your business are minimised.