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Business Link provides some useful tips on getting paid on time
20/09/2009
Business Link provides some useful tips for local businesses and entrepreneurs
Getting paid on time
Late payment of invoices and bad debt are two of the most common causes of business failure in the UK.
35% of small businesses estimate that late payment is costing them over £10,000 a year in bank charges and administrative costs chasing payments. Source: Tenon
In the South East around 40% of small and medium sized enterprises have had more customers paying late in the past 6 months. Source: South East Business Monitor, 1,200 businesses surveyed.
To help businesses to avoid payment problems, Business Link has produced a free practical Guide to getting paid on time, available to download at www.businessquestionsanswered.co.uk/dtguides
To help businesses to avoid payment problems, Business Link has produced a free practical Guide to getting paid on time, available to download at www.businessquestionsanswered.co.uk/dtguides
This guide covers the following and more:
- Getting the basics right – Don’t let late payments ruin your business
- Invoicing – Make it easy for your customers to pay
- Managing cashflow – Stay out of the red
- Accessing finance – Is factoring or credit insurance right for you?
- Chasing payment – Resolve problems with minimum fuss
- Make sure your staff are aware of each customer’s credit limit
- Send out your terms and conditions with every estimate or quotation
Here are some tips on how to get paid on time.
Get to know your customers. Signing a hefty deal is pointless if the customer can’t stump up the cash. It’s preferable to ask significant customers to complete a bank, credit and trade references form to assess how much credit to give them or if upfront payment is necessary.
Act now - If an invoice becomes overdue, act immediately. Hoping your customer will have a pang of conscience and cough up isn’t a form of credit control. It’s up to you to protect your cashflow and the health of your business.
Make a phone call - If you’ve made customers aware of your credit period and terms and conditions, they shouldn’t be surprised when you get in touch. Call the customer and politely remind them that payment is due. You’ll soon find out if they want to sort the problem out or are trying to buy time.
Don’t get fobbed off with common excuses – such as “the director who signs the cheques is on holiday”. In this case ask how staff salaries and utility bills are being paid and stress the importance of your account. Explain the different types of payment you accept and come to an arrangement.
Trade credit insurance – This is a good solution if late payments or customer insolvency could seriously harm your business. Policyholders can generally get insurance against bad debt to cover typically 75% or 95% of any loss. The insurer will need evidence of efficient standards of credit control and set a credit limit, based on your company turnover and bad debt experience. Find out more at www.insolvencyhelpline.co.uk
Put it in writing - Send standard reminder letters at 7, 14 and 28-day intervals. Remind the customer of your right to charge interest on the debt and keep chasing by phone. You can calculate the interest due on an unpaid debt by going to the Debt Recovery page under the Finance and grants section at www.businesslink.gov.uk.
Find a debt collection agency - If a customer is still not paying, it’s time to pass proceedings over to a debt collection agency. They’ll take a cut of any payments but, with 90% of debts cleared within 14 days, they’re worth the investment.
Business Link provides free information, advice and referrals to sources of help and support. For more information or to arrange a meeting with a Business Link Adviser to discuss cashflow and collecting debts or any other issue affecting your business, call Business Link on 0845 600 9 006, or go to www.businesslink.gov.uk/southeast. Download the free Guide to getting paid on time at www.businessquestionsanswered.co.uk/dtguides