Tag Archive | "late payments"

Contractors Spend 20 Days a Year Chasing Late Payments

According to IPSE, the Association of Independent Professionals and Self Employed, if you work for yourself then you spend 20 days a year trying to get paid.

It’s bizarre if you ask me…when you consider how easy it is now for companies to pay contractors for their services with options like Paypal and bank transfer, I just can’t work out why so many self employed people are having problems getting the money they deserve.

Apparently, it’s mostly big companies that are not paying out, which doesn’t surprise me one bit, because if there is one thing we all know it is that some of these multi national companies can be a real hassle to deal with.

Everyone you speak to just wants to send you to another department, constantly trying to pass the blame. Maybe you can relate to that one if you’ve ever done some contracting work for a big company before? You couldn’t make it up how difficult they are to deal with at times.

The research by IPSE also went to point out that this 20 days a year we all spend chasing up payments equals about £16.5 billion in lost income. This is just plain madness and something really needs to be done about it…pronto.

Well, we might be seeing action taken soon enough, because it appears that people in high places have been taking notice of how big companies are treating the self employed, and if things go to plan then late payment could soon be a thing of the past.

Just imagine how much more cash you could make if you didn’t have to spend 20 days of your year chasing up companies that make billions, but can’t to seem to pay you what they owe? If the small business minister, Margot James is to be believed, then by April of this year all big companies and Limited Partnerships will have to check in twice a year with information about their payment practices.

In other words, if they don’t pay you, then the government are going to be asking why. One of the numbers that is going to be looked more closely at is the average amount of time it takes to pay invoices, and if it is too long then they can expect a fine.

I’m sure this is going to mean that contractors finally start to get paid quicker for their work, it is just a shame that it had to come to this…don’t you agree? What a sad state of affairs when the government needs to step in and say “pay people for the work they have done.” It’s almost as if these big companies expect people to work for free. Some times I think they do.

Nearly 5 million people are currently self employed in the UK, and with virtually nothing being done right now to ensure they get paid, this new move by the government is much needed.

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£8.1 Billion Lost in Late Payments Every Year

It’s official…the self employed (including umbrella contractors) are losing out on an estimated £8.1 billion in late payments from customers each year.

Now I don’t know about you, but I didn’t realise this was such a big problem in the world of business, and that chasing up certain customers and getting them to pay is becoming tougher and tougher with each passing year.

Maybe the self employed, freelancers and contractors should always demand payment upfront when working with clients and customers for the first time, and only start accepting delayed payments when trust has been built up between the 2 parties.

Would this help to solve the issue? In part, maybe, but in competitive industries it is the customer who is king, and if you make them jump through too many hoops they will simply go elsewhere. For this reason, I don’t think the late payment problem will go away anytime soon, and in fact, we may even see that figure reach £10 billion by next year or the year after.

Astonishing I know, and unimaginable 20 years ago, but it is a sign of the times we live in and, ultimately, it just means that the self employed and umbrella contractors need to adapt.

Interestingly, it seems that late payments are the biggest problem in the South West, with 37% of sole traders reporting they have decided to give up on payments owed to them by customers and clients after getting fed up of chasing them around.

Fortunately, the West Midlands is better for the self employed, with only 21% saying they have given up on late payments owed.

I suppose one thing many businesses can start to implement is more in the way of digital technology, such as mobile payments and apps in order to avoid losing out on money.

As an example, if they had some kind of system in place where payments were automatically taken out of a clients bank account, or it was so simple to pay that all a customer had to do was tap a button on their mobile phone, then I’m sure we could potentially see the situation get better.

This could definitely help a lot of traders who are traditionally in a cash business, and where many times, a customer will simply never be at home or available to answer the phone.

If they could give them as many different options as possible to pay, then not only will they get paid more, but it also saves time and effort. Something that every self employed person wants to do.

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Large corporations still appear reluctant to settle debts

London and the South East of England top the late payments league, according to the latest study from Bacs.

Nearly 400,000 UK enterprises suffer because of delayed payments and the average owed to one company at any one time is £27,000. Although more firms in the south of England are owed money, they do not have as much debt outstanding as companies in the Midlands who are owed up to £38,000.

Large corporations are responsible for the lion’s share of the debt. They owe £24 billion to British SMEs and in some cases invoice settlement is up to 52 days overdue. The public sector and not-for-profit organisations on the other hand improved their payment times in the last half of 2010.

33% of SMEs say big companies are behind overdue bill payments and those operating in the manufacturing sector are the most likely victims. 53% of UK SMEs have suffered late payment, up 8 percentage points from June last year. When they do eventually receive settlement it’s an average 39 days over the agreed payment terms and this rise rises to nearly 50 days overdue in the distribution sector.

The burden of chasing overdue bills is having an adverse impact on smaller businesses. They now need to devote half a day every week to chase payment, equating to over 158 million man hours the British economy loses just to pursuing overdue debts.

At the same time, the number of firms using Invoice Financing to help improve cashflow rose by 16% in the year ending April 2011, according to the Royal Bank of Scotland.

Mike Hutchinson, Bacs’ head of marketing, urges more SMEs to use automated payments if possible so they can better manage funds which are under their control.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Insomnia. by sleepyjeanie

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HMRC urged to go easy on late paying SMEs

According to a new report published by Begbies Traynor, nearly 200,000 small businesses in this country are still struggling financially, even though the UK is now officially out of recession.

Of the respondents that took part in the survey, which included UK based recruiters and umbrella companies, more than £50,000,000,000 is owed to trade suppliers and long term creditors, such as banks and financial institutions.

In light of these findings, the Federation of Small Businesses (FSB) is now calling on the next government to apply a more sympathetic approach when attempting to recoup it’s tax liabilities. A spokesperson from the FSB said that HMRC should continue to use discretion when considering whether to call time on small businesses that are unable to pay their VAT, PAYE or Corporation Tax bill.

According to the FSB, the UK economy is still in a fragile state and the next government should introduce new measures to help small businesses access short and long term credit. They also want to see more pressure put on larger businesses to settle invoices on time to improve overall cashflow and liquidity in the SME marketplace.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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New PAYE fines introduced by HMRC

Limited company contractors, recruitment agencies and umbrella companies could be in line for a series of late PAYE payment penalties, which have been introduced by HMRC from the start of this tax year.

The move has sparked controversy in some quarters as many firms will be unaware that they have incurred a PAYE penalty until as much as 12 months after the original late payment occurred.

HMRC have stated that any company missing two or more PAYE payments will be charged up to 3 per cent of the outstanding tax due. In extreme cases, this will rise to 4 per cent and sometimes as much as 5 per cent where a PAYE tax liability is not repaid by the revised ‘settlement date’ set by HMRC.

Businesses are being advised to set clear payroll structures in place and to also ensure that a PAYE payment has been received by the tax office. Where missed payments occur, audit trails may be necessary to prove the business had every intention to make the payment in the first place.

Most umbrella companies and recruitment agencies are required to make monthly PAYE payments before the 19th of each month. Limited company contractors and sole traders are able to make quarterly payments if the total of the PAYE due (income tax, employee and employer national insurance) is less than £1,500.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Telling off by robinbyles

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Late payment trends could affect umbrella companies

According to recent research by BACS, the payment of invoices to UK SMEs, including limited company contractors and umbrella companies, is being delayed by an average of more than 40 days longer than the original invoice date.

This is particularly worrying news for umbrella companies who, by acting as a true employer to their workers, are bound to pay them each and every week regardless of whether the end client or recruitment agency has made payment to them or not.

The report found that the time takien to pay invoices has risen by nearly ten days over the last 12 months. This has had a devastating impact on some sectors, and particularly those where a healthy cash flow plays such a key role in the success or failure of a business.

Commenting on the findings, a spokesperson from BACS said that the extensive nature of late payments was having a “real impact” on businesses across the UK. The report also revealed that corporates are largely to blame for the latest trend, with nearly 40 per cent of respondents attributing them for the majority of their cash flow problems.

Albany, the umbrella company, was forced into insolvency earlier this year citing a lack of working capital as the route cause of it’s downfall. One can only hope that these latest figures will not signal more casualties in the umbrella company marketplace.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: monthly payments by TheTruthAbout…

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