How to future proof your business against late payment risks
With the current pandemic hitting businesses hard, it is inevitable that late payments will become more common, and many companies may find themselves stuck in a cycle of chasing overdue debts.
While everyone is in the same situation it may feel like there are few solutions to getting paid on time. However, there are steps you can take to try and safeguard your own business and support those around you.
So how can businesses spend less time chasing overdue invoices? Here are four 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 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.
This exercise should also highlight potential red flags with certain clients who are most likely to pay late. You can try to get ahead of these with regular contact and reminders to encourage your client to pay.
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 of processes for 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.
It may be useful to create a specific process to be followed during this crisis, focused more on communicating with clients and learning more about the challenges they are currently facing. You may also have to consider what you can offer clients in terms of repayment plans in order to keep some money coming in.
The learnings from this could help you create a much more effective process to follow in the long term, and added customer insight will help you make the best decisions for your business going forward.
3. Fall back on funding
Whether it’s a government scheme or funding from a lender, there are plenty of ways to keep money coming into your business at this time.
While this may not help you get paid faster, it does mean you have more flexibility to offer your own clients more flexible terms to help them through this difficult period while ensuring you do still get paid.
The right funding will also allow you to pay your own invoices on time, preventing the late payment cycle continuing onto your suppliers, and meaning these relationships are preserved for the future.
4. Outsource the collection of your overdue invoices
Focusing on new debts and other problems caused by the pandemic is essential, and one way to free up more time is to outsource the collection of older 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.
How will you benefit?
These are unprecedented times, and even the most secure business will be feeling the pressure.
There’s no easy fix to problems such as late payment, even in a relatively stable climate, but businesses can focus on the positive steps they are able to take at this time.
Having looked at some of the ways you can try to break a cycle of late payments, we wanted to explain how these steps can benefit you, both in the long term and short term.
- Spending time reviewing your own performance will help you keep on top of your cash flow and may highlight other areas you can cut back on spending
- Open communication with your suppliers and customers will strengthen these relationships going forward
- Using this time to implement new processes that help you run more efficiently could benefit your business in the long term
- Reaching out to expert services, whether it’s debt collection help, financial or other business advice could lead to a future relationship or learnings you can take forward when the pandemic passes
If your business is struggling with 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.