The small business district is familiar with the fact that, in some instances, major corporations intentionally delay payments. The reality is the following: SMEs are owed no less than $26 billion, in line with a study developed by PayPal and Intuit Australia, back in November 2015.
A recent example of late payments is the one provided by the prominent cereal manufacturer Kellogg’s and New Zealand’s Fonterra. Each of them has extended their payment terms to no less than 120 days. In the meantime, Nestle and Unilever are on 90 days.
Therefore, considering that the matter of late payments is a crucial reality, and nothing seems to alter, at least not anytime soon, what is there left for small businesses to do in this respect?
Battling Late Payments – A solution to a stressing problem
Initially, the matter of debtor financing entitles two distinct processes, namely discounting and factoring. When it comes to discounting, a financier advances a given percentage of the value of the issued invoice. The matter of factoring is comparable, apart from the fact that the financier is responsible for collecting on invoices, by merely deducting the fee from the money that needs to be repaid.
Scottish Pacific is one of the most recognised suppliers of invoice finance. The finance debtor, Greg Charlwood, clearly states that in the case in which there are problems with late payments, the issue should be transferred in the hands of experts. Even in the case in which an invoice is delayed only five days, that imminently leads to extra interest.
Hence, to put an end to late payments, innovation is the answer. Timelio provides big corporates with state-of-the-art technology that is embedded within the enterprise. At the moment, when a corporation accepts an invoice from a supplier, with the assistance of investors, the small business supplier is paid right away.
For example, in the case in which Timelio receives a message indicating that an invoice ought to be paid on day 14, the system sends a signal, and, afterward, the invoice is paid. Therefore, according to the head of Timelio – George Papanikolopoulos, the SME no longer has to wait until the 60th day or even more.
The system enables the supplier to have the percentage of any invoice paid up front. That’s because Timelio has a myriad of investors who aren’t resistant to taking the risks. The costs of this service may reach 0.75 percent of the monthly invoice.
Small businesses are still held accountable
In spite of this all, even though the matter of late payments is dealt with in this way, there is still a lot of pressure on small businesses, which ought to maintain their payment systems well-organised.
At the same time, the paperwork sent to clients should encompass relevant information concerning bank details, customer order reference, a far-reaching description of the goods provided, and the date the payment is due.
And lastly, small business owners are advised by experts to be meticulous concerning their business’ identity. In other words, they should make sure that they have the appropriate legal entity matching the credit application and ABN/ACN.
