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Getting paid on time - Business Link can help so you don't have to go it alone
21/07/2009
Business Link provides support to businesses in all situations and in all industries. Late payment of invoices and bad debt are two of the most common causes of business failure in the UK. This guide gives practical advice on how to encourage prompt payment. It covers issues such as credit-checking customers, efficient invoicing, cash flow management and what to do if payment becomes late.
Below are some top tips and actions that can be done today.
These are simple short term actions which may have long term benefits. It then looks at longer term actions designed to help you get paid on time. Links to our guides and other useful websites provide further information about specific issues.
Getting the basics right
Don’t let late payment ruin your business. At best, allowing customers to pay late will reduce your profits, at worst it will cause a cash flow shortage and your business will fail. Getting the basics right will reduce the risk of customers not paying on time.
- Credit check new customers
- Make sure your staff are aware of each customer’s credit limit
- Send out your terms and conditions with every estimate or quotation
Invoicing
Make it easy for customers to pay on time by getting your invoices right. If customers don’t know what or when to pay, there’ll be delays and deadlines missed.
Things to do today…
- Ask customers what information they need from invoices to speed up payment
- Examine the contents of your invoices against our checklist
- Spend half an hour checking over your credit management system
Managing cashflow
Lack of cash is one of the main reasons why businesses go under. Your business might be turning a profit but, if there’s a time when you can’t pay your bills, you’ll run into difficulties that’ll be very hard to put right. Effective cashflow management will keep your business out of the red and ensure you can pay your suppliers on time.
Things to do today…
- Assess how well your business is performing with our interactive tool www.businesslink.gov.uk/southeast/promptpayment
- Check your credit rating.
- Tell your suppliers what information they should include on invoices to help swift payment
Accessing finance
If you trade with other companies on credit terms, there are ways you can quicken inflows of cash into your business and protect it against bad debt. Factoring or credit insurance could form part of a longer-term strategy to managing cashflow.
Things to do today…
- Visit the Asset Based Finance Association website
- www.abfa.org.uk to find out more about factoring companies and their services
- Source recommendations from trusted friends and associates who have used factoring companies before
Chasing payment
Unfortunately, there will be times when customers don’t pay on time. Late payment will affect your cash flow and you simply can’t afford to ignore it. Keep calm and act fast and you’ll resolve problems with minimum fuss.
Things to do today…
- Double-check any outstanding invoices against your terms and conditions to check that payment is actually late
- Call the customer and politely remind them that payment is due
- Stop supplying the customer until the debt is settled
Top tip
Don’t let overdue debt damage future relations with the customer. If you want to work with them again, ask a member of staff who doesn’t deal with the customer to do the chasing.
Find out more about how to deal with debts you have already incurred at www.businesslink.gov.uk/southeast/promptpayment