Late Payments – Our Top 10 Tips
In the Spring Statement Chancellor Philip Hammond announced a crack down on late payments, citing the huge impact this can have on small businesses. Mike Cherry, Chairman of the Federation of Small Businesses had this to say:
‘The Chancellor is absolutely right to commit the government to eliminate the scourge of late payments, which place cruel financial pressure on more than eight out of ten small businesses. The poor treatment of smaller suppliers by many bigger companies is both unacceptable and holds back growth and productivity.’
Until the implications of the crack down are felt throughout the small business community though, late payments must be dealt with.
So what can you do to minimise the impact for your business?
- Check your Terms and Conditions are absolutely clear and legally enforceable. Get them checked by a Solicitor to make sure that if you need them, they will hold up in court.
- Send your invoices promptly. Make sure they go to the right person and are 100% accurate to the agreed terms, ideally electronically. See our Blog Post on Invoicing Software for more details of what to look for in invoicing software, which makes this easy.
- Keep your banking and bookkeeping up to date. You’ll then know what payments have come in, or which haven’t! Bank feeds within Xero and Quickbooks can do this for you with very little effort.
- Have a clear process for credit control that is applied consistently every time a payment is late. This takes the emotion out of the process and allows you to delegate it, allowing some separation of the relationship between you and the person chasing.
- Keep clear notes of what is promised and when, and confirm those promises in writing. You may need to show those broken promises, and you definitely want to follow up if a payment isn’t received by the promised date.
- Consider using Chaser or Debtor Daddy to take the basic ‘reminder’ type admin time burden off your shoulders. You then only need to become involved once these early stages have been completed, by which time it is more apparent that there is a real issue.
- Make paying you as easy as possible for your customers. Have a ‘pay’ link on invoices, use GoCardless or similar to collect payments by Direct Debit or use Stripe or a similar option to accept credit card payments. Put your bank details on your invoices and state your payment terms clearly as well.
- Know when to stop supplying – the relationship is only worth preserving if you are getting paid for your efforts, so don’t be frightened to stop adding to the debt.
- Invoke the Late Payment of Commercial Debts Act, assuming you have it included in your Terms and Conditions, and claim the interest you are entitled to. It may not be very much from a financial perspective but it may well discourage a repeat of the late payment situation.
- Be the one who shouts loudest – they’re often the businesses who get paid first! It’s human nature, if you are being chased regularly by one creditor but hear nothing from others, who would you pay if money was scarce? Be that person at the top of the list!
There are times of course when non-payment is understandable, and you may chose to allow a little variance from your Terms. This is your choice though, and should neither be assumed nor taken advantage of. Keep in touch with your debtors and you’ll know whether the late payment falls into this category or not.
Getting paid for the work you do shouldn’t be a battle, but always be prepared to fight when you need to. No-one sets up in business to subsidise another, and if you allow your customers to pay you outside of your payment terms, that’s exactly what you’re doing.
If you need advice to improve your Late Payment or Debtors position, please do get in touch. We can help!