Credit Control in the Time of Post Covid: How to Keep Your Business Afloat

Bad debt is a huge issue for businesses in the UK at the moment, and it’s only getting worse. The pressure of the last two years from Covid have taken a toll on every business. Whether that business is large or small, maintaining effective credit control is hard. As it becomes harder to chase down payments, you waste more time, decreasing productivity and this then impacts your cashflow even further.

Let’s take a closer look at how bad debt affects UK SMEs and what you can do about it! 

Current issues facing UK Small Businesses

Unfortunately, small businesses tend to bare-the-brunt of having to suffer with delayed payments and outstanding invoices. This then puts a significant stress on their available business cash flow and means that they struggle to cover financial shortfalls. The majority of  small businesses also don’t have the necessary systems in place to manage effective credit control and chasing payments. Add to this the pandemic’s impact to small businesses, and we’re seeing higher levels of debt, reduced cash flow, and less available credit.

These continued late payments mean that small business owners are then using up their valuable time trying to sort out their credit control when they want to be concentrating on their day-to-day business operations and growth. Late payments can also contribute to company insolvency – running out of cash, not out of profit, is one of the main causes of company failure.

UK SMEs impacted by substantial debt and cash flow issues 

The recent Financial Policy Summary and Record (July 2021), published by The Financial Policy Committee (FPC) has stated that since the start of the pandemic ‘debt vulnerabilities have been more substantial in some sectors and among small and medium‐sized enterprises (SMEs).’ The FPC also agreed that the ‘support from the financial system and the Government has helped to keep business insolvencies relatively low. However, companies with weaker balance sheets, particularly SMEs, may be more vulnerable to increases in financing costs.’ 

Bad debt is a huge problem for UK SMEs 

Increased debt and reduced cash flow affects businesses financially, but it also impacts the business owners personally. The latest figures show:

  • Currently, £23.4 billion worth of late invoices are owed to firms across Britain, impacting on businesses’ cash flow and ultimate survival. 
  • According to the Federation of Small Businesses (FSB), around 50,000 businesses close every year due to late payments, damaging Britain’s prosperity, and threatening jobs. 
  • 34% of business owners reported that they were not getting paid by customers or clients within the agreed terms of the payment system. 
  • 26% of businesses struggle to pay their own suppliers as a direct result of late payment of their invoices. 
  • 44% of business owners said that late payments were having a negative impact on their mental health. 
  • 29% of business owners felt they would be more productive if they weren’t worried about cash flow. 
  • 52% of small business owners have used their own money to keep their business going.

Outsourced credit control and invoice financing 

If you don’t currently have that peace of mind of knowing that your cash flow is healthy and stable, and your credit control is expertly managed, then invoice finance could be just the solution that your business needs.  

Invoice finance provides flexibility meaning you’re in charge and decide how and when to use the facility. If you don’t need as much money one month, then just take what is useful and adds value to your business. By only using the money when you require it, you reduce borrowing costs and ensure cash is always there when it is truly required. 

At a time when you need access to cash without waiting for customers to settle, invoice factoring is the perfect solution to help keep your business ahead. Professional credit control is key to the success of any business, and it’s a highly specialised area. An external credit controller will have the experience and expertise to manage your accounts effectively, freeing up your time to focus on other aspects of your business.

Contact us today and let us help you ensure your business not only stays afloat but goes from strength to strength.