Firms tighten credit controls
NORTH West businesses are tightening up their cash and credit control procedures in a bid to prevent late payments damaging cashflow, according to Yorkshire Bank.
Its invoice finance team found that during the past ten months, the average time businesses took to collect bills reduced from 52 to 49 days on combined sales of £6.7bn.
Richard Allen, regional invoice finance partner for Yorkshire Bank in Manchester, said there remains a growing pressure on companies’ cash reserves and the availability of credit.
“All businesses, particularly SMEs, depend on healthy cashflow to pay staff, buy stock and keep on top of their own invoices and bills,” he said.
“Poor cashflow management can be one of the most critical issues that businesses face but we believe UK companies have listened to the advice to tighten up their systems and controls.”
He added: “Adopting simple procedures such as agreeing payment terms and conditions upfront or using incentives for early payment can have positive effects.
“However, if late payments are a concern or are restricting cashflow, it is important to be rigorous in the debt collection process; recording conversations, possibly enlisting the services of debt collection agencies but ultimately looking for a swift resolution.”
Meanwhile, the Engineering Employers’ Federation has reported that credit conditions for manufacturers have eased in recent months, with a net balance of 4.3% of businesses reporting improved availability of borrowing – albeit at a higher cost than last year.
EEF North West region director, David Ost, said: “A greater improvement in the availability of credit after tentative signs of improvement at the start of the year is welcome, especially on existing terms as changes in these are often a point of sore contention amongst SMEs.
“Increasing costs, however, remain a frustration, particularly the proportion of companies reporting higher fees. This is arguably the part of the cost of finance that is least impacted by tight wholesale funding markets.”
