We Reveal Top Tips to Avoid the Late Payment Trap.
The statistics are scary:
- Poor payment practice costs UK business £20bn every year
- The total of late payments increased by £2.6bn to £18.6bn over the last year
- Small firms each owed an average of £30,000 at any one time
- 1 in 4 businesses go in solvent due to invoices being paid late – according to the Federation of Small Businesses.
No business, large or small, can afford not to take credit control very seriously. But there are simple ways to safeguard the financial health of your business by ensuring your customers pay on time.
- Make your terms clear. Agree payment terms at the order stage and have those terms printed on relevant documents such as invoices. Terms should include any credit period and details of interest charges on overdue accounts. Don’t forget all businesses have a legal right to claim interest from late paying customers.
- Consider credit checking potentially large customers. An online credit rating can be on your desk in minutes and cost from £10 upwards. Consider taking up credit references.
- Make your invoice clear. An easy to understand invoice will encourage customers to pay more quickly – don’t forget to include a detailed description of the goods, a reference to the order number and the agreed payment date.
- Chase outstanding bills ASAP. This is perhaps the most important tip of all. Always concentrate on the largest debts first, customers you guess may be in financial trouble and older accounts. Keep a log of your calls – date, time, who you spoke with and what was discussed. Do not be embarrassed about requesting payment – never forget it is your money. Phoning is one of the fastest ways to persuade late payers to pay up, but never call on Monday or Friday.
- Deal with excuses. Always be skeptical of excuses – they can often be simple delaying tactics. Put these customers high on your chasing list. Have a standard policy on dealing with common excuses, such as:
- I haven’t received your invoice” – check the invoice address is correct then immediately fax/e-mail another copy to the person you spoke to and phone to check it has been received and when you can expect payment.
- “I’ll deal with it shortly” – ask when.
- “The cheque’s in the post” – ask for the postal date and check number.
- Send 7-day letters. A seven-day letter is the first stage of the legal process – you cannot sue unless you have sent that person such a letter. Some businesses have a policy of not paying until they receive such letter. We offer an absolutely free solicitors' 7-day letter – there is no commitment and no hidden catches and our experience shows that 71% of debtors pay up at this stage.
- It’s good to talk. Maintain a positive and personal relationship with your customers. You are more likely to get the results you want if you adopt a friendly approach. Explain that you value their business and have been advised to take legal action but only want to do so if there is no alternative. Speak to the managing director or finance director of the business, or another decision maker if possible.
- Thank customers who pay on time – it is simple and costs nothing and really does make a difference.
If you would like further details on how to improve your credit control visit our Salisbury Solicitors website for a free downloadable recorded seminar on credit control and debt recovery and further details of our free 7day solicitors letter offer–or phone 01722 422300
