5 changes you should make to fight the late payment culture
For many UK businesses, a culture of late payments has left them without the necessary cash flow to expand. Despite new policies and actions to protect them, late payment continues to be an issue at the forefront of many business owners’ and decision makers’ minds.
If you’re concerned about the effects of the late payment culture that persists, it’s crucial to be proactive rather than reactive in your credit management.
When chasing overdue payments is already consuming valuable time, the last thing you probably want to do is spend even more time on credit management.
But these steps can help prevent future invoices becoming overdue and ultimately make your credit control more efficient going forward, saving the business time and money in the long term.
Run a background check on new and existing clients
Although most companies have some thought or strategy in place around onboarding new clients, this can be one of the first things to lapse when you are struggling financially.
Even if you have run preliminary checks, the allure of a lucrative new client may outweigh the risk of late payment, and in each unique circumstance this is something you’ll have to weigh up.
One way or another, without gathering the right information you can’t make an informed decision.
Credit checks are incredibly important in this regard, giving you an instant picture of the customer’s creditworthiness. But if you don’t want to pay to credit check your customers, you can still take some simple steps to help gauge the company’s reliability.
If the company is a signatory to the Prompt Payment Code, they have committed to paying invoices on time. If it’s a large company you’re looking to work with, you can check when they usually pay their suppliers thanks to new government policy.
Begin thinking about credit control at the point of sale
If you only begin chasing a customer for payment when the invoice becomes overdue, you’re making yourself vulnerable to regular late payments.
Show the companies you work with that you take credit management seriously and that it won’t go unnoticed if they don’t pay on time by contacting them before payment is due.
Read these 5 effective credit control strategies to implement after making a sale for advice on how to make prompt payments a focus throughout your sales cycle.
Review your policies and payment methods and troubleshoot
It may be that there are areas of your current procedure that actually impede prompt payment. Take a look back at any historical data you have and try and spot any recurring themes.
Even if there’s nothing causing an issue, there could still be some room for improvement. Review the payment methods you accept and how up to date they are. Take a look at the documents and information you send clients to see if it could be clearer.
Invest in software to make credit management easier
You may be thinking that the aim is to bring more money into the business, not find new ways to spend it!
In the long term, the right piece of software can make a huge impact on the productivity of your staff and the effectiveness of your credit control.
Take a look at these 9 tools that are helping businesses combat late payment.
Different software will suit different companies. You may not be ready to invest in a whole new accountancy solution, but maybe you would benefit from software that can automate reminders to your clients and make the overview of your sales ledger more accessible.
Think about what you can afford and how it will grow with you in the future.
Record and build on client calls
Recording customer calls is an often-used sales technique for improving customer interactions, but it can also be invaluable for credit management.
Take the time to record the calls you make to clients regarding payments, and what the result was.
You may find recurring excuses that clients give, and you can compose appropriate responses to these. It may be that you find that a direct approach works better at certain stages, while playing more on a customer’s relationship drives results at others.
This can be particularly useful if you have a recurring client who has paid late in the past. What were the excuses they gave? Can you identify an issue that’s led them to miss payment deadlines? You can also assess what led to them paying in the past and see if you can recreate this in the future.
Outsourcing the recovery of overdue invoices can give you and your team more time to focus on optimising your in-house credit control before the invoice becomes due. If you’re having trouble recovering a late payment, speak to one of our collection advisors by calling 0800 9774848 or getting in touch with us here.