Being paid on time if you are an SME – it can be done

A dangerous misconception has taken root among the nation’s SME community. It is a misconception that is costing SMEs hundreds of thousands of pounds every month. It is even driving profitable, viable businesses to the wall.

Here it is: “Our cashflow would be transformed if we could have our invoices paid by Direct Debit. But we can’t. We are just not big enough for the bank to even consider supporting an application from us. Direct Debit is only for big corporates like energy or mobile phone companies.”

If this misconception, that small businesses are barred from collecting payments by Direct Debit were corrected, the nation’s SMEs would see their cashflows transformed. And it needs to be addressed because it isn’t true.

The simple fact is that all the benefits that collecting monies by Direct Debit brings to large companies are equally available to SMEs. They just don’t know it.

The size of your company, its sector, and the number of Direct Debits you want to collect are not important. You can use Direct Debit to collect the money you are owed.

It doesn’t matter if you want to collect one Direct Debit a year or a 100 Direct Debits a day, if you partner with a Direct Debit Bureau, they will collect the money you are owed on time and in full, with no deductions. Once the money has cleared, it is transferred to your business account and will only take a few days.

A Direct Debit Bureau has all the accreditation, compliance and approvals needed to collect payments on your behalf via Direct Debit.

There are so many advantages to being paid by Direct Debit but the main one surely, must be the transformative impact it has on a company’s cashflow. Your company’s cashflow.

Maybe now, rather than existing inside your expensive overdraft, you can start to reduce it. Maybe now you can start planning for all the things you need but never had the liquidity to even consider.

Direct Debit, also, crucially breaks the endless, debilitating cycle of late payments. If you are paid on time and in full, then you can pay your suppliers on time and in full. Link by link the late payments chain is dismantled. The positive knock-on effect to the wider economy is incalculable.

Here’s another benefit: if you are willing to pay your invoices on time you could try and negotiate a discount from your suppliers.

One of the most familiar reasons for not being paid on time is this: “I can’t pay you because haven’t been paid.” It is a nasty vicious cycle, and we have all experienced it. Direct Debit removes that impediment to being paid.

Let us just put late payments into context. The last published research by Pay.UK in pre lockdown times showed that in September 2019, SME’s in the UK were struggling under a massive late payment debt burden of £23.4 billion. The year before, that figure stood at £13 billion. The amount SMEs were owed had risen by over £10 billion in a year. This level of debt is unsustainable. The UK is now known for having a culture of late payments.

Sadly, being paid late doesn’t just have an economic impact. It also brings with it emotional and mental health consequences. In the same survey, Pay.UK found that over a quarter (26 per cent) of business owners said that they stress about late payments even when they are not at work. Some 17 per cent said that payment delays undermine confidence in their ability to run a business. Almost ten per cent of business owners said they had considered seeking professional mental health support. All because businesses don’t pay each other on time.

As we begin, tentatively, to emerge from this pandemic, one of the key lessons must be ‘protect your cashflow’. We must act to become part of the solution. If you want to have your invoice amounts collected in full on the day the invoice is due, then being paid by Direct Debit is the only way to achieve this.

So, to close as we began, there is no barrier to SMEs collecting invoices by Direct Debit, just as the energy and mobile phone companies do.



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