57.5% of UK SMEs have experienced late payments during the Covid-19 pandemic. Over 21% of SMEs have seen increases of up to 50% for non-payment. The research comes as no surprise as the UK begins to recover from the near 6 months of affected business. With local lockdown restrictions in several areas of the UK, the hardship may well endure for some. Respected analytics gatherers McKinsey indicate half of UK SMEs are fearful the UK economy is currently weak.
The same research suggests 80% of SMEs are experiencing decreased revenue with substantial side effects:
- 1 in 4 SMEs are worried about defaulting on loans
- ¼ of SMEs fear they may not be able to retain employees
- 30% feel they will struggle to maintain supply chains
- 36% are preparing to postpone growth projects for 2020/2021
Research by Simply Business indicates a large portion of SMEs have already suffered irreparable damage. With businesses across the UKs 8 regions losing on average over £13,000, many SMEs are facing tough times ahead. Only about ¾ of businesses plan to go on as normal requiring a large-scale change across the country.
The same research concludes that per region, around 4% of businesses have permanently closed due to the pandemic. Despite government incentives, SMEs still need to be resilient to ride the wave while Covid is still a threat.
Many companies have found some solace in the furlough scheme, AYOM included. However, even as we return to some normality, the trouble isn’t over. Many fellow businesses are currently attempting to recover operations to normal levels. This may take months but with Q4 and winter approaching, it could require businesses to ride out Christmas to survive. Not all businesses are seasonal, but it is no secret that the winter months for some can tail off. Companies begin to prepare to close or reduce hours around Christmas and New Year. This could end up with 1 full year of barren results for many.
With the economy in its current state, outsourcing debt recovery could provide an unlikely boost to the economy. Businesses still require payment, especially during times of hardship. Debt recovery as a line of work focuses on putting money back into businesses and the economy.
Resolving SME debt books
Debt recovery isn't a subject that businesses enjoy approaching. This could relate old stigmas attached to the industry. The age of considering debt recovery agencies as "heavies" seizing property is far from reality. Many agencies like ourselves commit to providing a credible, professional recovery service.
Regulated by the FCA (Financial Conduct Authority) and members of the CSA (Credit Services Association), AYOM joins a host of credible agencies. These agencies take a view to resolve business debt in a professional manner. Conducting due diligence to ensure an agency matches your brand values is important. Using the FCA and CSA databases can help with that search.
Business debt collection is necessary when B2B transactions fail. Often this is a result of one side not paying within the terms of an agreement. This could be 30/60/90+ days after the goods or services are rendered. For business to business debt, there are protections available for SMEs. The Late Payments of Commercial Debts Act is the primary legal protection on offer. This enables you to seek late payment interest and reasonable collection costs. It makes the use of business debt collection worthwhile as the creditor will not endure more costs in the long term. While there are upfront costs, these are added to the value owed and are enforceable.
A debt recovery agency will establish regular communication with your debtors. We seek swift payment to avoid extended periods of non-payment or the need for escalation. Taking a case to court can be a drawn out and more expensive option which agencies will attempt to avoid. Thankfully we have strategies which have been tested over several years to produce excellent business debt recovery percentages.
Stick or twist
A big decision for many businesses currently is to give non-payers more time or act now. Debt recovery doesn’t have to become personal or negative but is an indication you want action. Our advice would be base your decision on your situation and relationships. Consider how much trust you have in those you supply to pay; they may be in the same position.
There will come a point however that assistance from an agency will benefit businesses. Agencies like AYOM stepping in will take away the need to send reminders or discuss terms of payment. We are also clear with what legal protection you are afforded. This lets you continue to run your business and undertake the rebuild following the pandemic.
Of course, choosing a reputable company will help alleviate the need for negative dialogue. A good agency will simply ensure the transaction is complete and both sides continue operating together. Therefore, many companies like AYOM are part of the CSA. The CSA has tighter regulation and provides best practice guidelines for all members. We adhere to stricter guidelines than the FCA, seeking a more professional approach. With high collection percentages on B2B debt, we can help boost the UK economy. Our primary function has always been assisting with SMEs’ outstanding debt books.
With so many SMEs affected, growth of business debt and CCJs issued could be substantial. Ideally, all of it requires paying. However, with business getting relief and some closing, it puts many SMEs in a difficult position. As much of the outstanding debt must be recovered to keep many SMEs functional. Placing this money back into SMEs will also feed back into the economy through their continued existence.
Successful collection of SME debt could be the unexpected kickstart the economy needs. Entering a recession, SMEs will need help to succeed once more. Businesses require liquidity to operate. Ensuring longstanding unpaid invoices are paid off can ease liquidity fears.
The following 2 quarters will be a huge period for UK SMEs. How they plan recovery strategies will guide success and failure. Debt recovery as a form of boosting cashflow is a very real option for many. For those seeking this option, AYOM has years of proven experience in business debt collection. We are happy to advise any companies wishing to recover unpaid invoices. The UK is entering recession. Now is the time for SMEs to consolidate your position. Get in touch and get the help to push through the tough times ahead.