Even if your company is looking strong on paper, if there’s no money in the bank to pay staff or your suppliers you’ll need to look more closely at your finance management system. We spoke to Robert Edwards, Director at Burrows & Grey Professional Recruitment, who says the better prepared you are, the lower the consequences. But if stuck in a tight spot, don’t panic – there are many options for companies struggling to pay their debts.

Be informed. Make sure you avoid getting into situations where your customers are unreliable with payment. You can do this by carrying out efficient due diligence, and conducting credit checks on larger corporations to make sure they are paying their current suppliers. Many banks have their own credit systems, meaning you can investigate customers online. Also, make sure your customers know what your payment terms are in advance of entering out business with them.

Practice what you preach. Likewise, you should make sure you pay on time yourself, and register with the Prompt Payment Code to ensure your suppliers can research your payment history too. You can also use this system to credit check your customers, and to learn more about good practices for paying your suppliers.

Be prepared. In the current economic client, your customers are more likely to pay you late. In fact, the average time period for payment is about 70-75 days from the invoice date. Keep this time scale in mind, as it’s often accepted to implement late fees, or interest on an invoice outstanding for 90 days or longer. Make sure you manage your cash flow effectively, to ensure such occasions do not seriously affect the company’s ability to operate effectively.

Seek help. There is no set level of income you should be making before you employ someone to take care of your finances for you. If you work in a products-based industry, your company will probably have more administration/finance requirements than if your business is service-based. Regardless of your business, if you’re struggling then it’s a sign to hire help. It’ll most likely save you money in the long-run because you’ll avoid unwanted and often unexpected financial surprises.

Factor your debt. If your customer seems to be ignoring your late payment notices, and your company needs the money urgently, you can ask the bank to assist with this problem. In return for a percentage of the money owing, the bank will pay you a large portion of the funds immediately, and then chase your customer for the payment. The balance, less charges, is paid to you at that point of full payment. The customer is then indebted to your bank. Your customers will pay more attention to a letter from them rather than your small business. However, the banks will only agree to do this for larger/established customers you might have, such as public authorities or multinational corporations.

Get credit elsewhere. If your customer is struggling to pay in a lump sum, you can speak to finance companies such as Premium Credit. This is similar to debt factoring but your customer will pay the finance company in monthly repayments, spread over a set period of time, while the bank will give you the payment up front, and in full (less their charges and interest). This is easier to establish than debt factoring, because rather than your bank examining your customers for approval, they instead look at who you are as a business, how your business operates, and whether you are registered with the relevant governing bodies; which is information you’ll be able to readily provide.