Bad Customers Throwing Their Weight Around?
...RIFT Accounting Tips the Balance
Good news for small businesses: the government listened and is killing off restrictive clauses on invoice financing. Find out what it means for your company's cash flow.
Picture this: after years of research and personal sacrifice, you've finally achieved your lifelong goal of splicing together the DNA of the greatest crimefighters in history. All you need to complete your super-detective are the cranial cryotubes to stop its brain matter overheating. The problem is, there's a clause in your contracts that stops you from invoice financing against late payers and now that expensive meta-brain you've built is literally melting all over your kitchen counter!
All too familiar, right? The thing is, that sort of clause wasn't even supposed to get in your way in the first place. Generally speaking, it's just supposed to clarify your ability to sub-contract on a given project. Unfortunately, too often it also means you can't apply for invoice financing to bulk up your cash flow when the going gets tough.
The good news is that, after a consultation started late last year, the UK government has decided to shake things up a bit by nullifying the clauses that are stopping you from accessing this vital form of finance. With invoice financing helping out around 44,000 businesses at any time, accounting for over £19 billion, that's a pretty big step in the right direction.
To be clear, late payment is never a good thing, particularly when it can lead to small businesses being bullied into bad situations. One slow-paying customer can often cause trouble for more than just their immediate supplier, who may well have other small businesses waiting for a desperately needed payment, with suppliers of their own to pay in a continuous chain. While invoice financing can't and shouldn't be thought of as an excuse for late payment, it's often been a life-saving means of easing the pressure and getting the cash flowing again. Certainly, killing off those restrictive clauses could help get a lot more of those super-detectives into circulation.
There are a couple of things to keep in mind, though, before we celebrate too hard. The new ban on the clauses:
As ever, there are loads of crunchy little details to sift through, but always remember that RIFT Accounting is here to make sure the cash keeps pumping through your business. Get in touch with any questions, and keep checking back for more Voices from the RIFT...