Save your business from the jaws of late payment – 8 top tips
As late payments continue to blight small businesses across the UK, with recent research from Amicus Commercial Finance revealing six in 10 invoices are paid late, it would seem the burden of late payment will continue to hinder the SME market for some time yet.
With so many businesses relying on timely payments to avoid cash flow shortage, and one in 10 of those surveyed fearing insolvency as a result of this, we confront the causes and reveal these 8 simple solutions to help encourage your customers to pay on time:
1. Create a clear credit control procedure
By clearly setting out a day-by-day strategy from the moment an order is placed until the invoice is paid, your accounts receivables team can adopt a co-ordinated and professional credit control procedure. Here’s how to create a winning credit policy.
2. Know your customer and compile a stop list
It is important to know your customer’s payment history before committing to offering credit terms. It can often help to place persistently late paying customers on a ‘stop list’ and warn them that they will not be supplied with any further goods or services until all outstanding invoices have been settled.
3. Invoice quickly and accurately
It sounds obvious, but it’s imperative to invoice quickly as some customers won’t pay until they receive the invoice which, along with any inaccurate information or unclear terms and conditions, can cause delays in payment. Acting quickly can also help you build a friendly and positive relationship, which ultimately encourages customers to pay on time.
4. Make it easy to get paid and encourage early payment
Giving your customers simple payment methods to use, such as BACS payment, direct debits and standing orders, and clearly displaying this information on invoices is an effective way of ensuring you get paid on time, as well as incentivising prompt payments with early settlement discounts.
5. Chase as soon as credit terms are exceeded… and don’t be afraid to take action
After reviewing your sales ledger regularly, you will be able to instantly spot any invoices that have exceeded credit terms and be more likely to get the desired outcome. Whilst remaining professional and polite, don’t be afraid to take action to get the invoice paid. The money owed is rightfully yours and can ultimately affect your business.
6. Be sceptical, and charge interest
Don’t always take your customers’ excuses for not paying for face value. Sadly, more often than not the excuses they will use are delaying tactics. By charging interest, you will encourage faster payment but also, by suggesting they pay by BACS transfer or direct debit, it will element the age old excuse of “the cheque is in the post”. Here are some other ways to overcome common payment excuses.
7. Bring in the experts and outsource or hire a credit controller
Credit control ought to be an everyday business task, given its importance to the success of your business. However, juggling this with every other task associated with running a business can be time-consuming, so bringing in an outsourced credit controller can help give you the time to focus on other areas. Download our brochure to see how we could help.
8. Thank customers who pay on time
Not everyone bends the rules, so thank those who pay you on time. It not only shows that you are grateful, but good customer service can ultimately lead to subsequent sales.
If you would like to learn more about how you can prevent late payment from affecting your business, we can help. Our team, highly skilled at credit control and debt collection, can be reached on 0800 9774848 or emailed at email@example.com