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Paying The Price For Late Payment
Despite arguments for and against the euro rumbling on, a growing number of UK firms (62 per cent) are now choosing to issue invoices in the common currency. However, many European companies have far longer payment terms than their UK counterparts, and this could cause cashflow problems for British businesses.
Jon Adams, regional director at Lloyds TSB Commercial Finance, which has a key regional office in Birmingham, highlights a potential pitfall for businesses in the West Midlands.
"The obvious problem, but the one that is probably most overlooked when dealing with overseas customers, is the difference between the length of time taken to pay invoices," he said.
"The average payment term for companies in the West Midlands, as with most in the UK, is 30 days.
"However, although this could be counted from the date of the invoice, the delivery of the goods, or 'net monthly' where the invoice is paid at the end of the following calendar month in the UK, companies in France and Spain enjoy a lengthy 60 days and will have their own ideas of when this is calculated from.
"The Italians indulge in the lengthiest payment period of 90 - 120 days, and often exceed the negotiated terms
.
"The ambiguity surrounding the length of time available for paying invoices is a major headache for many local firms, but can be easily avoided by clearly stating a due date rather than just 30 or 60 days.
"Of course, a lot of the legwork and guesswork regarding payment can also be removed by using an asset based lender that has the capability to chase outstanding invoices, whether issued to firms based in the UK or overseas.
"Amongst the many potential barriers to overcome when chasing late payment are the obvious language barriers, as well as a whole range of cultural issues, time differences and varying public holidays."
However, for those companies doing business with Scandinavian firms there is some good news. Scandinavian companies tend to have the same payment terms as in the UK and are also very prompt payers, so there shouldn't be any need to dig out the Swedish translation book just yet.
Lloyds TSB Commercial Finance is part of the Lloyds TSB Group plc.
Lloyds TSB Commercial Finance is part of the Lloyds TSB Group plc.
