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Over half of UK businesses have their year end in March or April, meaning
companies will be chased for payment of invoices and outstanding debts harder
over the next two months than at any other point in the year as businesses seek
to reduce their liabilities.
March and April have become a battleground for finance directors as debt chasing
creates major conflict.
One-in-five companies that employ strategies to improve their balance sheets at
year-end place the greatest emphasis on chasing outstanding debts.
But one in 20 businesses stop paying supplier invoices entirely towards their
financial year-end, which results in finance departments locking horns over
unpaid invoices.
In the months before year-end, 11% of businesses look only to pay essential
bills, such as to utility providers or HM Revenue.
A further 10% reduce the amount of invoices they pay to maximise the appearance
of their cash reserves.
Expenditure on non-essentials such as corporate entertainment, facilities and
infrastructure is limited by 40% of firms as they prepare to file their
accounts.
Discounts and special offers are offered by 8% of companies to drive additional
revenues as year-end approaches, even if it means cutting their margins in the
short term.
David Knowles, business development director at Creditsafe, commented:
“Businesses should actively manage their finances towards the end of their
financial year, as the accounts filed at Companies House will be used as one
indicator of future financial performance.
"However, firms looking to strengthen their capital position should be wary of
holding onto cash and not paying their bills as this could impact negatively on
their credit score.
"Firms hoping to make their balance sheets look healthier by not paying
outstanding invoices could find this strategy is counter productive as a lower
credit score makes it more difficult to secure loans, overdrafts and supplier
credit facilities in the long term.”
Source: Credit
Control Journal
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