Is your business struggling with late invoice payments?
Whatever size your business is, whether you’re a florist, a freelancer or a food factory, managing cashflow is always a priority. And that means getting your invoices paid on time. We understand how demoralising it is after spending days or weeks on an important client project only to be paid late. Meanwhile, you still have staff and bills to pay.
In fact, Banks Automated Clearing System (BACS) published a report stating that half of all SMEs experience late payments, on average by 24 days. Some businesses even have to cease trading. To prevent that from happening to your business, here’s some expert advice on tackling and chasing late payments without losing customers.
- Carry out a quick online credit check on new clients. Existing ones, too, if things are becoming problematic.
- Ask for upfront payments, such as 25%-50% of a project fee, especially when you begin working with a new client. If they’re serious, they’ll pay.
- Make your payment terms clear. Set up a working agreement, including:
a. frequency of invoicing for long projects
b. how and where to pay you, and within how many days
c. avoid cheques – encourage clients to use bank transfers or Direct Debits for long-term projects
d. a named contact for any invoicing or payment issues
e. include all the above in your invoices - You can claim interest on late payments at 8% over the Bank of England’s base rate. Knowing that may be a good incentive for clients to pay on time. Similarly, you could offer ‘early payment’ discounts; just ensure that you’ve calculated your costings sufficiently to allow for that.
- Regular online payment scheduling, like Paycada’s Payment Portal. This automated streamlined process minimises the need for you to chase and improves your customers’ experience – find out more about this at the end.
- Send SMS text messages before payment is due. This acts as an effective gentle nudge.
- Ring clients before payment is due. Particularly when you’ve issued a large invoice. This provides a good customer service opportunity to check whether they have any questions on how things are progressing in general.
- Polite reminders. Sometimes, businesses without enough support may simply forget to pay. A gentle reminder by email or phone is often all it takes for them to pay quickly and apologetically.
- Allocate an Account Manager. Choose one finance person in your business to act as their main contact for invoicing queries. Ideally, someone who you know has the best customer support attitude and would engage well with your client. Be prepared for them to escalate the situation to you if needed.
- Offer personalised, flexible payment terms. If your customer is consistently late with payments, or if they’re up front in telling you about cashflow problems, then work out a solution together to maintain your business relationship. Solutions could include paying a large invoice over a period of time or scaling down work with them until they’re in a better position to return to your original agreement.
- Withold working with them until the outstanding sum is paid. This can be good leverage to get your invoices paid, especially if they regularly need your services.
- Chase late payments within two days of their due date. This sets a precedence that your organisation does not tolerate late payments. Leaving it any longer risks your invoices being held further down their payment queue and can allow the problem to intensify. If necessary, use a Debt Collection Agency, but only as a very last resort. Do check what the debt recovery commission is as these can be considerable.
If all this fails and the client is ignoring you, consider letting them go. You could use the time you’ll save on a new client who pays on time.
FinTech with Think Tech Solutions
One of the easiest ways to chase late payments is by automating the entire process, saving you a lot of time and angst.
Paycada does far more than send out automated reminders for you. Most accounting software does that.
Designed using the latest in communication technology, Paycada superior tracking facilities recognises customer behaviours – their payment and interaction patterns – dynamically adapting its automated responses to get you the results you need. Paid!
Paycada takes away the frustrations of chasing payments, allowing you to focus on doing what you love!
Get in touch today to discuss how our systems will help your business.
