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Transport firms face late payment problem

Small and medium-sized businesses in the UK transport and logistics sector are owed £727 million on any given day because of suppliers and customers failing to pay on time, says Barclays Local Business annual Late Payments report.

On a typical day, they are £2,690 out of pocket as a result of suppliers or customers failing to pay during the standard 30-day invoicing period.  It means these businesses have lost nearly £271 million over the last 12 months due to non-payments – an average of £1,000 per business.

John Davis, marketing director for Barclays Local Business, said:  “Despite some recent positive economic signs, it's concerning that late payments are on the rise.  It’s a serious issue for the transport and logistics businesses we talked to – over a third say it threatens their day-to-day survival.”  Barclays’ tips for tackling late payment include:

• Credit check your customers.  Barclays offers CreditFocus to all small businesses, not just its own customers, which enables them to credit check their five main customers and automatically alerts them when a customer's credit rating goes up or down.
• Go electronic.  Encourage your clients to pay electronically, rather than by cheque.  It will boost your cashflow and mean funds start to earn interest immediately.
• Early reminders.  Don't leave it to the last minute to chase customers who haven’t paid – being pro-active can often pre-empt a more serious problem and lead to a swifter solution that suits all parties.
• Peace of mind.  Run regular credit checks on new customers or suppliers.
• Sort your system.  Agree payment terms at the start of all contracts to avoid confusion, and monitor your payment system regularly so overdue invoices are quickly identified.

The report also found that 40% of transport and logistics firms have borrowed (loan or overdraft) to improve cash flow as a result of being paid late and that firms spend on average 1.3 hours a day chasing late payments.

Firms typically have to wait almost a fortnight (13.7 days) after the invoice due date before they get paid.