With customer demand looking optimistic and order books largely stable across the manufacturing industry for 2022, businesses are able to concentrate on output – but for many, there’s a hidden external challenge still to face.

Poor payment practices can hinder productivity, causing manufacturers in the UK to lose time, money, and output by chasing unpaid invoices.

A study by Barclays found that last year, 58% of SMEs in the UK were waiting for late payments from customers. For medium-sized enterprises with 50 to 249 staff, the number waiting on late payments rose to 94%1.  When it comes to chasing payments, small businesses typically spend more than a week each year pursuing what they’re owed – that’s 56.4 million hours, worth £6.3bn to the economy2.

Keeping a finger on the pulse of late payments, and creating a strategy to deal with them, can help your business avoid lost income and misspent days.

When does a late payment become an overdue invoice?

If you agree a payment date, an invoice will become overdue on expiry of that date.

Otherwise, invoices should be paid within 60 days, and invoices from small businesses with less than 50 employees must be paid within 30 days. This guidance is set out by the Prompt Payment Code, a voluntary code of practice for businesses which is backed by the government.

Where parties have agreed payment terms, the law allows you to charge interest the day on which the invoice is outstanding. For example, if you have payment terms of 30 days, you can charge interest from day 31. Where there are no set payment terms, interest starts to run 30 days after the last day of delivery of the services/goods.

What are the consequences of overdue invoices?

In England and Wales, in most cases you have up to 6 years to commence proceedings for an unpaid invoice. If you decide not to pursue the debt, the overdue invoice can become bad debt, and eventually be written off entirely. Research by Atradius3 found that up to £8 in every £100 of B2B sales last year were written off as uncollectable – and that’s not a straightforward process.

Often, late payments can be an oversight or case of human error, easily rectified with a phone call or email. In many cases though, overdue invoices are an indicator that your client can’t or won’t pay. Delays on payment can have a knock-on effect across supply chain, expenditure and investment. And, with insolvency a looming shadow (there were 1,679 registered company insolvencies in the UK this September alone4) acting fast on unpaid invoices is key to saving your business time, productivity and cashflow.

How do I act quickly on overdue invoices?

Put in place an invoice recovery policy.

Whatever the root cause, unpaid invoices are detrimental to the health of your business – but it’s easy to take back control with invoice recovery. And, if invoice recovery is a part of your process, your debtor days are reduced because payment issues are routinely outsourced if an invoice expires.

Third-party legal expertise can make invoice recovery fast, efficient, and most importantly compliant. The right legal team is able to quickly assess your outstanding invoices, make recommendations and help you apply compensation, late fees or interest to the debt. They’ll seek recovery of your outstanding debts without the heavy-handed approach that risks damaging important client relationships.

Muckle Collect is a debt recovery service suitable for businesses of any size; whether you’re calling in a single debt or hundreds. Muckle Collect makes invoice management quick and easy so you can get back to doing what counts. Using the service gives businesses access to a bespoke invoice management portal where you can upload invoices for recovery and track their progress.

Our expert team has been recovering debts for 30 years and has ranked top tier in the Legal 500 UK directory for the last ten. We’re respectful of your client relationships; you can count on our personable approach to negotiating successful settlements and on our expertise for sound strategic advice.

For further advice or more information about Muckle Collect and invoice recovery, please contact Matthew Brady using matthew.brady@muckle-llp.com or 0191 211 7838.

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