ICM says focus should be on late payment not bank lending
8 August 2010
Figures from Bacs Payment Schemes Limited (Bacs), the organisation behind Direct Debit and Bacs Direct Credit, show that outstanding invoices owed to Britain’s SMEs are estimated to be £24 billion, with the average amount owed to an SME at any one time being £25,000.
Philip King, Chief Executive of the ICM, believes there is a very clear need to change the payment culture within the UK. “Whether the reason for the paucity of bank lending is less willingness to lend, or a decline in demand, it’s vital that SMEs are getting the message about the critical importance of cashflow, and that they are actively seeking expert help where it is available.
“Banks are only one source of cashflow and businesses have the ability to generate more cash for themselves. SMEs must get the basics right – agreeing payment terms in advance, invoicing promptly, and not giving the customer any reason to dispute their invoice once it arrives, and then perhaps we would understand the true reason behind these late payment figures.”
The ICM launched the Prompt Payment Code (PPC) in December 2008 and has been working with Bacs and other business organisations to drive further awareness of the PPC and promote the importance of paying on time, across the whole business community. The Prompt Payment Code is designed to encourage and promote best practice between organisations and their suppliers. It is hosted by the ICM at www.promptpaymentcode.org.uk.
Mike Hutchinson, head of marketing at Bacs, said: “Through our work with the Prompt Payment Code, encouraging companies to be more proactive and diligent in their payment collection practices and using automated payment methods such as Bacs Direct Credit to streamline processes, we hope to make a real difference to the impact that late payments have on SMEs.”
Philip concludes: “It’s time that businesses large and small treated each other more fairly, and that businesses did more to help themselves. Customers are extending their credit terms to keep hold of their cash for longer,” he says, “and whilst this is a viable credit management strategy, it shows the importance that SMEs should attach to their own credit management practices.”