Are the Effects of Lockdown An Excuse for Late Payments?
As soon as Britain was plunged into lockdown, it sent a wave of panic across the nation’s industries.
Some reacted too quickly and let staff members go, while others took the difficult decision to accept government support.
Furlough may provide a good safety net, but why is it not the solution to bad business practices?
Building a Reputation
“We’ve been running since 2006, so we’re well-versed in determining the difference between a genuine delay and an excuse.”
The biggest culprit? Construction.
“Every industry will try to prolong payment terms as much as they can, but construction has a reputation for late payments, in part, because of the lead times on their projects”
“Construction obviously takes a lot longer than 30 days, so often they will say that they need to wait for the project to be finished and for retentions to be finalised.”
This can present a huge problem to all suppliers to this sector including recruitment agencies, many of whom send in contractors to work on such projects.
“Often, we’ll hear that the project is over and the contractors’ contract has ended, so there’s the temptation not to pay,” adds Wendy. “With the work complete, the debt still needs to be paid.”
How Has Lockdown Changed Credit Control?
Akin to Brexit or other situations beyond our control, lockdown has become a common scapegoat for difficult debtors.
“We understand that cash flow is much more challenging at the moment, but we’re hearing pleas from companies who owe money from pre-lockdown”
This would have been budgeted for before the pandemic.
“If their credit control procedures are in order, they should also still be collecting monies owed during this period.”
The Case for Recruitment
Another industry that’s set to take a hammering is recruitment, warns Wendy.
“This is a concerning time for small recruitment agencies, who may have flexible workers on their books with nowhere to place them. This will only add to business stresses.”
“If they want to stay afloat, they need to make sure any debtors are up-to-date with their payments.”
In the short term, then, Wendy suggests outsourcing the credit control function to help businesses survive through the pandemic.
“Up to 90 per cent of companies will make a payment when they receive a letter from a third party”
“We are that third party – there’s no emotion to it and we’re totally unbiased yet professional, understanding the business relationship.”
“Outsourcing credit control is a reliable solution for those needing help to sort out their finances, both right now and way into the future,” concludes Wendy.
If you are trying to focus on re-building your business without worrying about having to spend time collecting late payments too, please contact PCS Credit Management.