May 2022

Contract Business Talk Advice
Continued from page 62
rate, eliminating one less obstacle for a healthy
cashflow.
A strong pound could adversely affect sales you
make abroad if you export goods, as it will be
more expensive for your international buyers
who may then decide to look elsewhere for more
favourable costs. With this in mind, it would be
wise to have a contingency plan in place for a dip
in international orders.
Business funding
As interest rates rise we can expect to see a
reduction in lending from banks and financial
institutions as repayments will increase which
increases the risk of defaults.
This can be a challenge to businesses accessing
cash needed for growth or for a cashflow
emergency, and will make loans they can secure
more expensive to pay back unless interest rates
come back down.
Outstanding loans
Any outstanding loans will be more expensive to
pay back in line with the interest rate. As rates
rise, so will outstanding loan repayments.
Businesses who rely on loans to stay solvent
could only be repaying interest of the loan,
meaning the outstanding balance never reduces.
Not a situation any business wants to find
themselves in!
Late Payment Interest
Late payment interest is something very few
firms are taking advantage of, with many leaving
money on the table when collecting payment for
late invoices.
The Late Payment of Commercial Debts Act
gives you a statutory right to claim interest
from other businesses for late commercial
payment.
The amount of interest you can charge is 8% plus
the Bank of England base rate for business to
business transactions, currently 0.75%, so you
can legally charge 8.75% of your invoice value as
interest if the invoice is paid late.
“Businesses who rely on loans to stay solvent
could only be repaying interest of the loan,
meaning the outstanding balance never reduces.
Not a situation any business wants to find
themselves in”
Higher return on savings
Any cash deposits could see higher returns
thanks to interest, which is good news!
The caveat, however, is the returns will be far
lower than the current rate of inflation and
especially if we do see inflation rise to 6%.
Combating the effects of inflation and
rising interest rates on your business
cashflow
The best way you can mitigate the effects of inflation
and interest rates is having a healthy cashflow so
external factors can’t rock you as much.
Making more informed credit decisions by fully
understanding your customers’ payment trackrecord
means you can offer payment terms that
are suitable, reducing the risk of your customer
defaulting on payment. If you have outstanding
invoices you’re likely sitting on a pile of cash!
A whopping one-third of UK businesses aren’t
actually chasing late payments, leaving heaps of
cash on the table.
Chasing payments can be time-consuming for
companies but is there anything more pressing
in business than recovering cash we’re owed for
jobs?! Know-it automates the complete credit
control process, empowering you to credit check
and monitor companies, automatically chase late
payments and collect overdue invoices in one
platform.
Contact Know-it
www.know-it.co.uk
@Knowitglobal
64 TI MAY 2022 PRACTICAL CONTENT FOR THE GLAZING INSTALLER & HOME IMPROVEMENT SPECIALIST