Management Accountants Take Account Of Slow Payers

New research from Experian shows that large companies are taking even longer to pay their suppliers than a year ago, despite Government pressure on them to improve their performance.

UK companies employing more than 500 people paid their bills an average of 34.19 days late during the second quarter, compared with 30.91 days late a year before.

The Federation of Small Businesses (FSB) has said that the issue of slow or late payment is one of the “biggest challenges for small firms”, which would be even greater if management accountants did not account for late payments when preparing their firm’s budget.

Late payments have a detrimental effect on an organisation’s plans, as if they are relying on the cash to launch new products or market the company’s services, they can, in turn, become late payers themselves or not even be able to afford the item or service they need.

However, when the management accountant is preparing the budget, they will take into account the slow payers on the client list and will look at their purchasing history to ensure that there is enough cash in the coffers to wait out the period between purchase and payment.

Conversely, they might advise management to change the terms of business for specific customers, perhaps ensuring that they pay up front because of their poor payment history.

They will also have a policy in place that covers new customers, including credit ratings from reputable suppliers and will advise management on how to handle new enquiries and on what credit terms, if any, to set.

With all the information at his or her fingertips, the management accountant is well placed to ensure that slow payment does not hinder the smooth running of the firm.