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Hilton-Baird’s Late Payment SurveyJanuary 2013
Introduction“THE PROBLEM of late payment remains a thorn in        “In addition, we delve deeper into the worstthe sides o...
Background to researchHILTON-BAIRD Collection Services’ research wasundertaken among 317 businesses across a rangeof secto...
Key findingsBRITISH businesses reported a four day increase in    and pay HM Revenue & Customs later (18%) as athe time it...
Delay in paymentThe delay in payment beyond agreed credit terms reached a two-year high in 2013 as businesses reducedtheir...
Delay in payment by turnoverBusinesses with a turnover of between £1m and £3m are suffering the longest delay in payment o...
Delay in payment by sectorBusinesses in the engineering and maintenance sector are suffering the longest payment delays of...
Delay in payment by regionBusinesses based in London are experiencing the longest payment delays of almost 26 days beyonda...
Impact on the businessThere was a significant annual fall in the proportion having to pay HM Revenue & Customs later as ac...
Age of debtor bookAlmost two in five businesses classify over 10% of their debtor book as more than 90 days old, up from32...
Uncollectable turnoverOnly 34% didn’t write off any of their turnover as uncollectable in the past 12 months. Exactly half...
Worst offendersPrivately owned / limited companies continue to take the longest to pay their invoices, and got worse atdoi...
Most common excusesWaiting for payment from customers remains the most common reason for late payment, while there wereinc...
Naming and shamingMore than two-thirds of respondents believe that late payers should be named and shamed by theGovernment...
Credit circlesOnly 11% of businesses benefit from and share important credit information with other businessesthrough a cr...
Credit management strategies                                                           2011    2012    2013 Key credit man...
Credit control functionThere has been no annual change in the proportion of businesses conducting their credit control fun...
Outsourcing benefitsThe majority of respondents view the primary benefit of outsourcing all or part of their credit contro...
Future credit management strategies                                                                  2011          2012   ...
Late payment interestAlmost two-thirds of businesses who don’t currently use or consider using late payment interest as ac...
About Hilton-BairdAS part of the Hilton-Baird Group, Hilton-Baird       Memberships and affiliations to the CreditCollecti...
Contact details Hilton-Baird Collection Services Ashwood House Ashwood Gardens Southampton SO16 7LF +44 (0)2380 707392 +44...
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Hilton-Baird Collection Services' Late Payment Survey January 2013 report

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Hilton-Baird Collection Services' Late Payment Survey January 2013 report

  1. 1. Hilton-Baird’s Late Payment SurveyJanuary 2013
  2. 2. Introduction“THE PROBLEM of late payment remains a thorn in “In addition, we delve deeper into the worstthe sides of British businesses, tying up valuable offenders, and look at how much support thecash and restricting their ability to kick start a business minister has in his proposals to namerecovery. and shame late payers.“As its profile continues to rise, business minister “Once again the research has produced someMichael Fallon has threatened to name and shame interesting results for us to share, so thank you tomembers of the FTSE 350 who refuse to sign up to all those who participated in the survey. Yourthe Prompt Payment Code and pledge their input is greatly appreciated.”support to paying on time. Alex Hilton-Baird“The news arena is littered with regular reports Managing Directorthat some of the country’s largest businesses are Hilton-Baird Collection Servicesinstead extending their credit terms, andimposing them on their smaller suppliers. Moreoften than not, this is leaving them with littlechoice but to grit their teeth and accept them asthey continue to struggle to secure new orders.“In this context, our annual Late Payment Surveyprovides an opportunity to uncover the biggestimpacts of late payment on businesses of all sizes.The research also looks at how the problem isdeveloping over time, and what businesses aredoing to manage this.
  3. 3. Background to researchHILTON-BAIRD Collection Services’ research wasundertaken among 317 businesses across a rangeof sectors, regions and sizes in order to provide arepresentative sample of the UK’s SMEs.Conducted in January 2013, this latest studyrepresents our third wave of research:- Wave 1: July 2011- Wave 2: January 2012- Wave 3: January 2013The results demonstrate how late paymentcontinues to impact the performance of SMEs inthe current climate and the steps businesses aretaking to safeguard their cash flows from itseffects.
  4. 4. Key findingsBRITISH businesses reported a four day increase in and pay HM Revenue & Customs later (18%) as athe time it took their customers to pay invoices direct consequence.during the 12 months to January 2013. Onaverage, customers paid 21 days beyond agreed The most common excuse given by customers forcredit terms, up from 17 days beyond agreed late payment was that they were waiting forterms in 2011. payment from their own customers, as reported by 30%, followed by 23% saying waiting forAs a result, 38% now classify more than 10% of payment authorisation was most prevalent andtheir debtor book as more than 90 days old, which 11% arguing that their terms take precedent.led to 63% having to write off more than 1% oftheir turnover as bad debt during the past 12 Respondents used an extensive range of creditmonths. management strategies to protect themselves against late payment. The suspension of work andThere was widespread support for business services (54%) and customer credit facilities (45%),minister Michael Fallon’s proposals to name and and the use of new customer credit checks (48%)shame late payers, with 69% backing him and only and the Small Claims Court/CCJs (31%) all16% against the notion. increased on an annual basis, while 14% outsource all or part of their credit control function.Privately owned/limited companies continue totake the longest to pay their invoices, as reported Of those that do, the facilitation of the collectionby 44% of respondents. of aged and overdue debts (60%) was overwhelmingly the primary benefit ofAs you would expect, the biggest impact of late outsourcing.payment was that 73% had to spend more timechasing late payers. But there were encouragingfalls in the proportion of businesses having to paysuppliers later (48%), increase borrowing (29%)
  5. 5. Delay in paymentThe delay in payment beyond agreed credit terms reached a two-year high in 2013 as businesses reducedtheir average credit terms and customers took longer to pay their invoices in full. Delay in payment Payment gap (days) Payment (days) 80 22.16 20.68 16.92 * Credit terms (days) 70 60 51.77 51.16 49.41 50 40 32.49 31.73 29.58 30 20 10 0 2011 2012 2013 Base (Credit terms): 1,002 (all answering question 1) Base (Payment): 846 (all answering question 2) Base (Payment gap): 817 (all answering questions 1 & 2) * Significantly different from the total score at 1% significance
  6. 6. Delay in payment by turnoverBusinesses with a turnover of between £1m and £3m are suffering the longest delay in payment of 23days. However the largest firms, those with a turnover in excess of £3m, are experiencing the shortestdelay. Delay in payment Payment gap (days) 23.17 Payment (days) 80 20.68 20.24 18.24 16.14 Credit terms (days) 70 60 53.86 53.90 51.16 49.24 50 45.85 41.17 * 40 33.65 31.73 30.61 30 25.86 20 10 0 Total Under £500k £500k-£1m £1m-£3m Over £3m Base (Credit terms): 319 (all answering question 1) Base (Payment): 265 (all answering question 2) Base (Payment gap): 249 (all answering questions 1 & 2) * Significantly different from the total score at 1% significance
  7. 7. Delay in payment by sectorBusinesses in the engineering and maintenance sector are suffering the longest payment delays of almost26 days. Manufacturing firms benefit from the shortest payment delay, which still stands at a sizeable 19days beyond agreed terms. Delay in payment Payment gap (days) 25.67 Payment (days) 80 20.68 22.21 19.88 19.28 Credit terms (days) 70 59.10 60 55.11 56.68 51.16 50.71 50 40 37.54 35.27 31.73 33.05 31.18 30 20 10 0 Total Construction Engineering & Manufacturing Wholesale Maintenance Base (Credit terms): 319 (all answering question 1) Base (Payment): 265 (all answering question 2) Base (Payment gap): 249 (all answering questions 1 & 2)
  8. 8. Delay in payment by regionBusinesses based in London are experiencing the longest payment delays of almost 26 days beyondagreed terms. Firms in the south of England are being paid the soonest, at just over 45 days, and benefitfrom the shortest payment delay as a result. Delay in payment Payment gap (days) 25.74 Payment (days) 80 20.68 21.07 18.39 16.58 Credit terms (days) 70 60 54.78 51.16 52.04 50 45.47 45.36 40 31.73 31.87 29.58 28.08 28.74 30 20 10 0 Total London Midlands North South Base (Credit terms): 319 (all answering question 1) Base (Payment): 265 (all answering question 2) Base (Payment gap): 249 (all answering questions 1 & 2)
  9. 9. Impact on the businessThere was a significant annual fall in the proportion having to pay HM Revenue & Customs later as aconsequence of late payment. There was also a significant rise in the proportion able to report that latepayment had no effect on their business in the last 12 months. 2011 2012 2013 Biggest impact of late payment on the business (%) (246) (110) (244) Difference Spend more time chasing invoices 84 76 73 Pay your suppliers later 63 59 48 Increase borrowing (including credit cards) 39 38 29 Pay HM Revenue & Customs later 34 36 18* Employ more credit control staff 6 6 8 Turn away new business * 11 12 7 Make redundancies - - 6 Employ an external provider of credit control services 7 8 5 Reduce staff working hours / shifts - - 5 No effect on the business 4 5 16* Our customers always pay on time - - 2 Base: 600 (all) * Significantly different from the total score at 1% significance
  10. 10. Age of debtor bookAlmost two in five businesses classify over 10% of their debtor book as more than 90 days old, up from32% just 12 months ago. Less than 20% classify none of their debtor book as more than 90 days old. Percentage of debtor book over 90 days old (%) None 1-10% 11-20% 2011 (368) 15 42 23 18 1 Over 20% Dont know 2012 (179) 19 47 19 13 2 2013 (240) 19 43 22 16 0 0 10 20 30 40 50 60 70 80 90 100 Base: 787 (all)
  11. 11. Uncollectable turnoverOnly 34% didn’t write off any of their turnover as uncollectable in the past 12 months. Exactly half wroteoff between 1% and 5%, with 5% writing off more than 10% as uncollectable. Proportion of turnover written off as uncollectable in last 12 months (%) 60 50 50 40 34 30 20 10 8 2 2 3 1 0 None 1-5% 6-10% 11-15% 16-20% Over 20% Dont know Base: 238 (all)
  12. 12. Worst offendersPrivately owned / limited companies continue to take the longest to pay their invoices, and got worse atdoing so over the past 12 months. Corporates / listed companies improved their payment performanceduring the same period, according to respondents. Types of customers which take the longest to pay invoices (%) 2011 2012 60 2013 50 43 44 41 40 30 23 23 19 * 20 13 14 13 9 8 10 7 7 7 6 5 5 4 5 2 1 0 Privately owned / Corporates / Sole traders / Government / Individual private Professional Other Limited Listed Partnerships State owned clients firms companies companies Base: 770 (all)
  13. 13. Most common excusesWaiting for payment from customers remains the most common reason for late payment, while there wereincreases in the proportion being told that their customers’ terms take precedent and that theircustomers are waiting for payment authorisation. 2011 2012 2013 Single most common reason for late payment (%) (360) (173) (229) Difference Waiting for payment from their own customers 33 34 30 Waiting for payment authorisation 29* 20 23 Their terms take precedent 2* 10 11 Can’t afford to pay 7 13* 7 Copy invoice required 11 8 6 Forgot to pay * 4 2 6 Sales didn’t notify accounts department of the invoice 3 2 4 Cheque in the post 2 3 3 Invoice disputed 4 4 2 Other 3 2 6 Our customers always pay on time 1 2 2 Base: 762 (all) * Significantly different from the total score at 1% significance
  14. 14. Naming and shamingMore than two-thirds of respondents believe that late payers should be named and shamed by theGovernment. Only 16% didn’t think they should be, with 15% undecided on the matter. Proportion that think late payers should be named and shamed (%) 100 90 80 69 70 60 50 40 30 20 16 15 10 0 Yes No Dont know Base: 229 (all)
  15. 15. Credit circlesOnly 11% of businesses benefit from and share important credit information with other businessesthrough a credit circle. Proportion that belong to a credit circle (%) 100 90 82 80 70 60 50 40 30 20 11 10 7 0 Yes No Dont know Base: 229 (all)
  16. 16. Credit management strategies 2011 2012 2013 Key credit management strategies currently employed (%) (341) (163) (221) Difference Constant reminding (phone / email) 3* 69 68 Suspending work / services 1* 47 54 New customer credit checks 50 47 48 Writing to debtors, including solicitor involvement 1* 45 47 Suspending customer credit facilities 53 39 45 Small Claims Court / County Court Judgments 41* 29 31 Visiting debtors in person 32 26 30 Regular existing customer credit checks 30 30 29 Interest on late payment / Fixed late payment charges 27 21 25 Written credit policy 23 21 16 Factoring * 13 10 16 Inclusion of debt collection costs in T&Cs - - 15 Early settlement discounts - - 11 Credit protection insurance 6 15 9 Goods repossession 10 7 8 Inclusion of Personal Guarantees in T&Cs - - 5 Outsourcing 0* 5 4Base: 725 (all)
  17. 17. Credit control functionThere has been no annual change in the proportion of businesses conducting their credit control functioninternally. There has also been a significant annual decrease in the proportion of businesses outsourcingtheir entire credit control function. Over the last 12 months, credit control has been carried out... (%) Internally Externally Both internally and externally 2011 (358) 82 1 16 2012 (173) 86 5* 9 2013 (227) 86 1 13 0 10 20 30 40 50 60 70 80 90 100 Base: 758 (all) * Significantly different from the total score at 1% significance
  18. 18. Outsourcing benefitsThe majority of respondents view the primary benefit of outsourcing all or part of their credit controlfunction to be that it facilitates the collection of aged or overdue debt. Only one in four outsource thisfunction due to its benefits of reducing Days Sales Outstanding. Benefits of outsourcing the business’s credit control function (%) 2011 * 70 2012 60 2013 60 54 * 50 43 38 40 29 30 29 30 29 30 27 24 25 * 20 10 0 Facilitate collection of Reduce in-house Separate collections Reduce Days Sales aged or overdue debt overheads from sales in customers Outstanding eyes Base: 100 (all answering ‘Externally’ or ‘Both internally and externally’ to Q11)
  19. 19. Future credit management strategies 2011 2012 2013 Credit management strategies to be considered (%) (333) (162) (221) Difference Interest on late payment / Fixed late payment charges 33 25 27 Suspending customer credit facilities 15 16 19 Small Claims Court / County Court Judgments 14 17 17 Writing to debtors, including solicitor involvement 0* 13 17 Inclusion of debt collection costs in T&Cs - - 16 Suspending work / services 1* 12 14 Regular existing customer credit checks 14 9 14 New customer credit checks 8 9 14 Written credit policy 10 7 14 Early settlement discounts - - 13 Visiting debtors in person * 15 15 11 Constant reminding (phone / email) 1* 10 10 Credit protection insurance 7 7 8 Inclusion of Personal Guarantees in T&Cs - - 8 Goods repossession 8 5 6 Outsourcing 0 10* 4 Factoring 4 9* 3Base: 716 (all) * Significantly different from the total score at 1% significance
  20. 20. Late payment interestAlmost two-thirds of businesses who don’t currently use or consider using late payment interest as acredit management strategy choose not to because they believe their customers would simply ignore it.Over half are also concerned about the risk of losing customers. Reasons for not charging interest on late payments (%) 80 70 63 60 51 50 40 30 20 10 7 3 2 0 Customers would Potential risk of Effort and time Dont understand Dont know ignore it losing customers required to update how to apply it T&Cs Base: 104 (all not currently using or considering using interest on late payments in the next 12 months )
  21. 21. About Hilton-BairdAS part of the Hilton-Baird Group, Hilton-Baird Memberships and affiliations to the CreditCollection Services is the UK’s leading commercial Services Association and R3 (the Association ofdebt collection agency that serves the UK’s banks, Business Recovery Professionals) ensures that weindependent lenders and SME and corporate maintain the highest standards throughout themarkets. collections process and endeavour to provide a friendly and enterprising service at all times.Established in 2001, we pride ourselves onproviding an efficient, professional and To find out more about Hilton-Baird Collectiontrustworthy resource that is ultimately successful. Services, visit www.hiltonbaird.co.uk/cs.Our services to the SME and corporate Alternatively, please call 02380 707392 or emailmarketplace range from one-off debt recovery to collections@hiltonbaird.co.uk to speak to ourongoing credit control support that’s tailored to team today.each businesses’ individual requirements, workingclosely with both clients and their customers inorder to bring the right conclusion to oftendifficult circumstances.With an experienced, highly skilled andmultilingual team, we can assist with our clients’debt collection requirements no matter whichcountry their debtors lie, working round the clockto ensure we can best surpass all expectations inall of our debt recovery activity.
  22. 22. Contact details Hilton-Baird Collection Services Ashwood House Ashwood Gardens Southampton SO16 7LF +44 (0)2380 707392 +44 (0)2380 707393 collections@hiltonbaird.co.uk www.hiltonbaird.co.uk/cs © 2013 Hilton-Baird Collection Services Limited

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