Cashing in

Cashing in

Statistics suggest that late an increasing number of installers are struggling to get late invoices settled – creating longer term problems for the success of their businesses. Jens Munch looks at the current alternatives that could have a positive impact.
It’s a familiar tale – early starts, late nights and lots of physical graft. After a long day unblocking sinks, fixing pipes and installing heating systems, the last thing installers want to do is travel home to plough through a pile of paperwork. But with late payers in the UK estimated to owe small and medium sized businesses (SMEs) a whopping £55 billion in unpaid or outstanding invoices, it seems getting clients to pay on time is becoming increasingly difficult.
Cashing inInvoices are a useful point of reference for businesses, but the time and effort it takes to receive, obtain and process payment often restricts much needed cashflow.
With more than 4.9 million businesses in the UK – and the Federation of Small Business revealing that over half the SMEs it had surveyed received late payments – it is clear that many need to review their billing methods to ensure they are using the most efficient solution.
Installers in particular should look to adopt payment methods that will allow them to maintain a healthy cash flow and encourage business growth. The nature of the job means emergency call-outs are very common and customers up to their knees in water from a burst pipe are unlikely to have had time to pop out and get enough cash to pay on the spot.
Being able to take payments by card, for example, will be welcomed by many customers and decrease the time and money spent on chasing payments post repair.
Chasing the payments paper trail  
Just over a year ago, an EE survey revealed late or non-paying customers owed plumbers, electricians and builders more than £283 million.
“Getting paid straightaway is crucial,” says Fabio De Gregorio, owner of FD Plumbing & Heating. “Chasing late payments from clients is a job in itself and can take up far too much time.”
67% of small businesses still issue paper invoices. In a small business, work can pile up quickly and in focusing on getting the practical work done it’s all too common for invoicing to take less of a priority and a backlog to build up.
Marlon Wolff, a small business advisor from Ingenious Britain, reckons SMEs waste at least two weeks a year tracing late payments – valuable time that could be spent earning money instead of chasing it.
Fixing late and outstanding payments
Individuals and organisations have always been cautious with money, especially when it’s being spent. But now the recession looks to be heading to an end and cash flow is easing, it’s crucial small business owners take back what’s rightfully theirs –  especially from the big companies that may owe money and have the cash but are slow to pay.
In 2008, the British Government introduced the Prompt Payments Scheme to help small businesses get paid on time. Despite lots of talk and endless promises to put a stop to late payments, the Government’s scheme is yet to have had a significant effect. Big companies still pull the strings when it comes to payments terms and small companies are reluctant to contest, as they can’t afford to lose big business.
The latest figures from the European Payment Index 2013 estimate that the average payment duration was 41 days.
This hold up has all kinds of impacts – especially for tradesmen. With big jobs often requiring subcontracting additional workers, plumbers and builders need to have money readily available to hire the staff needed to complete the job. Anything that can help a firm get paid quickly should be taken advantage of.
Processing payments to profit quickly
Recent years have seen the emergence of services and technology that can help generate much smother cash flows for small businesses.
One such area is mobile payments. This method, which can be accessed via a user’s smartphone or tablet, is free of lengthy fees, sign up processes, monthly costs and minimum spend limits. Solutions – such as iZettle – allow merchants to take secure transactions within seconds.
Tackling the unavoidable
For the invoicing that is unavoidable, companies such as Market Force can provide a quick fix. Here, investors lend working capital to small businesses by buying their long-date invoices. This means small businesses get access to money quickly. According to an estimate from the Royal Bank of Scotland, companies using invoice financing will receive as much as 95% of the money they are owed from unpaid invoices within hours of an invoice being sent out.
Nonetheless, it’s important for the small businesses considering these solutions to remember these companies will also take their cut of revenue in return for their services.
Work smarter, not harder
To maximize their costs, overheads and efficiency, tradesmen need to review their payments process and make sure they are managing payments in the best way possible.
With research showing late and outstanding payments costs 3.7% of the UK’s annual turnover, tradesmen need to adopt innovative solutions that will encourage a consistent flow of money and allow them to spend less time on paperwork and more time servicing clients.