Businesses that have offered payment holidays to customers may be damaging their own chances of survival, according to the Chartered Institute of Credit Management (CICM).
By Carly Davies Debt Recovery Manager.
A survey by CICM of its members suggests that of the 83% of firms who had offered a payment holiday, two thirds (66%) said there would be a negative impact on revenues and profits.
Of those, a quarter (25%) said the losses could amount to 40% or more, seriously impacting their own future performance and viability.
The majority also saw no immediate end to the current hiatus, with 82% expecting the payment holiday to last for at least another three months, and 16% of those not expecting any payments until the end of 2020.
Sue Chapple, Chief Executive of the CICM, believes the figures confirm what many have feared, that some businesses may be sounding their own death knell. She said: “Payment holidays benefit some to the financial detriment of others, and there has to be a day of reckoning.
“‘Holiday’ is a complete misnomer; there is no respite. It is simply delaying what still has to be paid, and the impact on cashflow for those trying to protect their supply chain could prove disastrous.”
Of the 17% of firms who did not offer a payment holiday, some simply extended payment terms while others were working on a ‘pay as you go’ basis.
The survey captured the thoughts of 1,000 CICM members across multiple sectors, from construction companies and builders’ merchants to legal firms and recruitment consultants.
If you would like advice about debt collection and credit management please contact Carly on 01228 585245.