New data from GoCardless illustrates the difficulties SMEs face when chasing late payments – and unsurprisingly, women struggle with this social issue the most. Lynne Darcey Quigley, CEO, and founder of Know-it, discusses why breaking this taboo is so essential.

Recent data from Fintech firm GoCardless, published earlier this week, shows the scale, impact, and social distribution of late payments and the social taboos that make asking for payment harder for some than others.

• Almost 38% of SME decision-makers say they feel awkward chasing customers for late payments.
• 10% believe it’s more challenging to talk about money with their clients now than before the pandemic
• One in six smaller firms admits they follow up with less than a quarter of late customer payments.
• Staggeringly, a majority reveal they would be willing to waive some 10% of their annual revenue to avoid the topic.
• Women are the most affected – with almost half saying asking for the payment they are owed leaves them feeling uncomfortable and awkward.

Lynne Darcey Quigley, CEO and founder of Know-it, comments:

“Securing cash flow is essential for all businesses but is even more vital for small to medium-sized enterprises, as they will have a smaller pool of capital to absorb the delay in payment. It is not only an issue for thousands of businesses and their ability to survive, particularly in a turbulent post-pandemic economy, but also a cause of significant stress for those business owners that have to confront late payers. This is particularly true when it begins to have a negative impact on your own business cashflow.

Of course, during the pandemic, many had legitimate reasons not to pay on time. However, even so, asking for the money you’re owed, for work you’ve done and supplied, is vital to getting paid on time – as we see business owners use every excuse under the sun to avoid this responsibility, and quite often, they need prompting.

Confrontation around money is understandably a difficult social situation. This is one reason it can be a good thing to get professional debt-recovery specialists involved and to know that those you do business with have a good track record of paying on time.”

Lynne continued: “Whilst the data from GoCardless suggests there is perhaps a gender issue that exists, in my experience as a female founder, it’s simply not just female-led businesses that struggle. This is an issue that affects everyone. In fact, the data worryingly shows that many people would even lose the revenue they are owed rather than risk facing confrontational requests for payment. “

Not only is this impacting the continuity of SMEs, risking survival or at best being a drain on both time and cost, it is also putting added pressure on small-business owners that need all the help they can get. When you significantly reduce the amount of time you’re left waiting for overdue invoices, you will be able to concentrate on critical areas of improvement. Reducing debtor days directly lowers the level of financial risk your company is exposed to.

Lynne concluded: “Understanding which of your customers are a risk to your cash flow and monitoring your connected supply-chains will help minimise the risk of late payments. Having the ability to credit report and monitor, highlight obvious red flags and alerts of any changes to your customers behaviour can be hugely important.

In the current climate, where cash is paramount, making better, informed credit decisions, remaining within agreed credit terms, reducing debtor days and focusing on getting your cash into the bank is key.”

This article was first published by SME Business News.