Late payment is a much talked about subject and research published in
2014 proves what an increasing issues it is with 57 per cent of small
businesses waiting more than 90 days for payment and 72 per cent waiting over
60 days.
Whilst late payment can lead to detrimental cashflow issues, a lot of
companies take the decision to not pursue debtors too strongly, concerned about
losing their business. But the thing is, staying in control of outstanding accounts
with regular reminders is a good way to do business, and most customers will
realise that you are simply doing what is necessary to keep afloat.
Chasing debts though should be considered a secondary measure. In fact,
it is something that could be avoided for the most part by putting certain
processes in place. Here are five such processes that could make all the
difference to your business.
1. Get invoices out
on time
Issuing invoices punctually, getting them to the right person and
indicating any purchase order number or reference will help boost the
processing time for your payment. Make sure your payment terms are clearly
stated and that the goods or services provided are listed together with the
name of the person who placed the order, so that there is no question over what
was supplied, for whom, and what is owed.
2. Make written
terms & conditions the rule
Make it a rule that you never start a project or supply goods without first
obtaining written agreement to your terms and conditions, and to your pricing. Make
sure the terms clearly state what is being supplied, the costs involved, and
when payment is due. Don’t leave it till you send your invoice to provide
terms: it’s too late by then.
3. Be firm about
credit checks
Unless you are demanding payment upfront, don’t do business with any new
customer until you have carried out a credit check. Depending on the size of
the job, you may wish to order paid-for credit searches, ask for bank or trade
references or, at the very least, run a check on Companies House to see if
there are any registered charges.
4. Look for Evidence
of the Prompt Payment Code
The Prompt Payment Code
is a voluntary code developed by the Department of Business, Innovation and
Skills. It sets out a statement of commitment between a business and its
suppliers concerning prompt payment. You may wish to maintain a policy that you
only do business with customers who have signed up to this code.
If you are having
difficulties with late payments, or would like assistance in putting measures
in place in order to avoid them, your bookkeepers
will prove a very useful resource.
