Late payments are a serious problem for Scottish and UK businesses. Research by accounting software company FreeAgent shows that two in five invoices issued by small companies were settled late in 2018. Free Agent used data from its 80,000-strong customer base to analyse late payment issues.
The Government have taken steps to tackle the late payment crisis, but there are a number of steps small businesses can take to mitigate the risk of late payment, which we have listed below.
1. Know your customers
It seems simple but knowing the credit-worthiness of your customers before extending them credit can prevent payment difficulties further down the line. Credit reference companies can help you with carrying out searches, or you can make free necessary checks using Companies House.
2. Be clear about when payment is due
Again, this seems obvious, but making sure your customers are clear about when they should be paying you is fundamental in avoiding late payment. Draft your terms and conditions with clear payment terms and always talk them through with new customers. Your terms should include details of the enforcement action you will take if bills are late, and details about commercial interest and debt recovery costs.
3. Avoid taking cheques
Where possible, you should encourage customers to pay you using direct debit, electronic transfer or even cash. BACS, the payment organisation, has warned that cheques are often a source of late payment disputes and as a result, should be avoided as far as possible.
4. Don't let the problem get out of hand
You should begin chasing unpaid bills as soon as possible. Where your efforts to secure payments for goods or services that have already been supplied are fruitless, do not offer further credit to the customer. This can often prompt a customer to make timely payments.
5. Build good relationships with your customers
You should be in touch with customers regularly and let them know when you are sending invoices. Clients will appreciate this, particularly for more substantial sums. You can also keep lines of communication open, and if customers are having cash flow problems themselves, you may need to be flexible. You could for example allow them to pay by regular instalments, or when they know they will be getting an influx of cash, so long as a date is agreed.
6. Get professional help
Getting professional help with debt recover can greatly improve the running of your business and get you back on track. Whether you employ a member of staff to chase debt, or get the help of debt recovery lawyers to act on your behalf you should see a return on the amount you pay for credit control services.
Contact Yuill + Kyle debt recovery specialists
If you need advice or assistance in recovering debt, we can help.
Recovering money that is owed to you is vital to the health of your business, but retrieving outstanding debt can feel like a daunting task. Repetitive letters, ignored phone calls, awkward conversations, sound familiar? With over 100 years of experience, we are specialists in the art of resolving disputed and undisputed debts. To discuss your specific needs with a member of our team, call us today on 0141 331 2332 or complete our online enquiry form and we will get back to you right away.