How To Get Paid On Time

 

Late or lost invoices

 

When it comes to small businesses and freelancers, customers tend to get away with delayed payment and sometimes even with non-payment. Whether said customers are individuals receiving your services in their residences or big companies hiring you to work on their commercial premises, delayed payment is a fact of life for many SMEs.

Customers often do not care or even understand that small businesses work with a very small margin, and hence need to have their payments cleared within the stipulated period. This is borne out by the fact that two-thirds of the monthly expenses of SMEs is spent on going after debtors and trying to collect payments.

Data from BACs Payment Schemes Limited show that more than £8 billion is spent per year for this purpose, and around one-fifth of company directors end up having to take a salary cut to balance this cost.

SMEs are by definition small companies operating on very thin margins. The highest burden of non-payment such a company can take before collapsing would be around £50,000, while many companies cannot handle outstanding debt of more than £20,000. When the average rate of late payments is about £32,000, you can see why this is a huge problem and can have a severe impact on the economy.

But just because customers are accustomed to pay late, it does not mean that you cannot do something about it. Though this is a risk most business owners take and account for, it is important to have some rules in place to minimise late payments and to make sure that you know what steps to take if there is a payment problem.

 

Inform yourself

There are laws to protect small businesses from going under because of delayed payments. It is important for you to inform yourself about these laws and seek ways to cut the impact of delayed payments. You can charge interest and claim debt recovery costs from the customer. All these laws are for your convenience and protection, so know them and use them to your best advantage.

 

Automated payments

Encourage your customers to set up direct debit with your company. This should prevent any problem of delayed payment from arising at all. Once the work is done, the payment will be made. Electronic payment also ensures that the funds are transferred right away and you will receive them far sooner.

 

Automate your process

You should also look to automating your processes. Job management software allows you to create your invoices from your job as soon as the job is completed, you can raise your invoices directly or export them to an accounting package. This helps make sure your invoices go out straight away and enables you to track them so you know when they have been paid or when they are being delayed.

 

Ask for an advance

If you are undertaking a task that would cost more than a nominal amount, insist on an advance. You could charge 25% or even 50% of the total amount. This should help in taking care of your immediate expenses, and you are also confident in the knowledge that at least part of the payment is already done.

 

Rely on credit checks

Many companies do run on credit. But before giving credit to your customers, make sure you know how credit-worthy they are. Check out their credit reports from the Companies House or from a reference agency. Based on this, you can set a credit limit, both in amount and in time, for your customers. This will put you in control of outstanding payments and you can decide when to cut the credit.

 

Send reminders

It is important to show your customer that you take your payments seriously. Send the reminders just before the payment is due. In cases of delayed payment, do not hesitate to contact your customers and politely demand that your account be settled right away. You can remind them that you will charge interest on late payments. For these reminders, a phone call is always better than an email or a letter.

 

Networking

Keep on good terms with your customers. If your customer is a company, it is a good idea to network with people in the accounts department. Such networking will make sure that in times of difficulty, your payment will be the first to get cleared.

 

Reward prompt payers

Try to offer incentives for those who pay on time without any fuss. If your customers know that prompt payment comes with its own rewards, they would be more inclined to make the payment right away. This kind of positive reinforcement works wonders and helps in solving the problem of delayed payments.

 

 

Find out more about Okappy job management software and how it can help ensure you get paid on time.

 

 

 

 

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