Late payment forces recruitment companies to increase borrowing
This figure is significantly higher than the nationwide average of 30 per cent, and includes those who have had to rely on credit cards to overcome the financial impact of late payment.
The annual Late Payment Survey discovered that, on average, recruitment businesses are being made to wait 21 days beyond agreed credit terms for their invoices to be paid, with 49 per cent left with no alternative but to pay their own suppliers later. More than one in three (34 per cent) have also had to delay payment to HM Revenue & Customs, which compares to just 19 per cent of the UK’s business population.
Managing Director of Hilton-Baird Collection Services, Alex Hilton-Baird, said: “While late payment has adversely affected the vast majority of businesses in the UK, it is obvious that the pockets of recruitment businesses are being hit just as hard, if not more so.
“The fact that so many are being driven to increase borrowing and delay payment to other creditors as a result of late payment just goes to show how much of a priority clamping down on this plague must be, both for the next government and, primarily, businesses themselves.”
Interestingly, recruitment firms are adopting a much firmer approach to late paying customers than businesses in many other sectors.
While over half (54 per cent) have used Small Claims Courts or County Court Judgments since the beginning of 2012, 37 per cent apply statutory interest to overdue invoices. A further 26 per cent have implemented a written credit policy for staff to follow in the event a debt exceeds credit terms, while 23 per cent have credit insurance in place.
As a result, only two per cent of recruitment firms have had to write off more than five per cent of their turnover as uncollectable during the past three years, as opposed to 11 per cent of all businesses in the UK.
Alex continued: “In many respects the recruitment sector is leading the way when it comes to taking a no-nonsense approach to late payment. There are many ways in which businesses can reduce the impact of late payment on their cash flow and performance, whether charging statutory interest, securing credit insurance or seeking the help of experts. Our advice is to know exactly what your options are in the event your customer misses a payment deadline.”