How to break the late payments cycle
With the UK’s late payment culture showing no signs of stopping it’s no wonder that so many businesses feel stuck in an endless cycle of chasing overdue debts.
Although the ideal scenario would be for late payments to become a thing of the past altogether, many businesses just wish they didn’t have to spend such a high proportion of the time they dedicate to credit control chasing overdue accounts.
Aside from the fact it’s not the most enjoyable exercise and can be quite draining being told another scarcely believable excuse as to why their invoice hasn’t been paid, having more time to stay on top of the newer invoices and make courtesy calls before they’re even due can have a huge impact in preventing late payment.
So how can businesses spend less time chasing overdue invoices? Here are five steps to help you break the late payment cycle.
1. Analyse your current performance
Take a look at your current credit control performance and ask yourself where you’re going wrong and what improvements could be made. If you spot any recurring issues such as invoices not being sent on time, regular disputes or you’re simply offering credit to businesses who just can’t afford to pay, these issues need to be addressed immediately in order to break the cycle going forward.
2. Implement new processes
Using what you learned from your analysis in the previous step, take the time to create and implement a new set process fo your credit controllers to follow. This should detail a day by day strategy from the moment the order is placed until the invoice is paid. Once you have agreed on the procedure you should provide the necessary training for your staff and ensure that all stages are completed and stuck to.
3. Compile a stop list
Persistently late payers are never going to get their act together if you keep letting them get away with it. So, implement a stop list where any poor payers are refused further products or services until they settle all of their unpaid bills. This list must be updated regularly and strictly adhered to in order to break the late payments cycle of your worst offenders, and can quickly encourage them to clean up their act.
4. Charge late payment interest
One of the quickest ways to change your customers’ attitudes towards late payment is to penalise them for doing so. Under the Late Payments of Commercial Debts Act businesses are entitled to charge interest on debts that have exceeded credit terms. Sometimes simply informing your customers of this statute is enough to give them an added incentive to settle the invoice as soon as possible, so be sure to include this in your terms and conditions.
5. Outsource the collection of your overdue invoices
Another way to regain the time to focus on newer debts is to outsource the collection of overdue invoices to a debt collection agency. First and foremost the agency will have the resource, expertise and authority to get these invoices paid faster, improving your cash flow and reducing the impact of late payment on your business. But it will also mean you can get back to focusing on the rest of your ledger, keeping on top of customers before the due date to lower the chances of them missing the deadlines and adding to the problems you’re facing. Whether you choose to pick which individual invoices to send over or pass over all debts which reach a certain age, this can have a big impact on the health of your ledger and business.
If your business is spending too much time chasing overdue invoices, as a leading debt collection agency we could help. Contact us on 0800 9774848 to discuss your requirements or get an instant quote to see how much we would charge for successfully recovering your invoices.