Georgia Leybourne, sales and marketing director at Albany Software, on getting to grips with the Late Payment legislation.
Managing cash flow has become one of the great SME arts over the past year and looks set to remain a critical skill for business survival for some time to come. But just how many organisations understand the costs that are being incurred as a result of failing to pay on time?
The costs are, in fact, significant. Organisations are spending considerable time and resources on the escalating administration associated with manual payment processes and in fending off calls from creditors. To add to this, under the Late Payment legislation, there is a very real risk of penalties.
Signing up to pay key suppliers via Corporate Direct Debit (DD) significantly reduces this cost for payers. Not only is the payment transaction paid by the payee, but embracing a guaranteed payment method removes a significant administrative burden and minimises credit control activity.
DDs also provide tangible benefits for the payer – most notably in reducing the administrative process associated with preparing and making payments. The cash is debited from the bank account at a set time, unlike cheques, which can take days to arrive and are not always immediately cashed, putting further pressure on cash flow management.
Replacing traditional methods such as cheques with DDs also reduces the risk of fraud. Indeed, with the banking industry and the Payment Council expected to make it difficult and expensive to use cheques in the build up to phasing out cheques for business use by 2018, the early adoption of DDs ensures organisations already have an alternative payment solution in place.
Georgia Leybourne, Sales and Marketing Director, Albany Software: www.albany.co.uk
