Companies face many challenges as they grow. One of the most prevalent is collecting payment for the goods and services you have provided. The latest Business Barometer, conducted by Close Brothers, showed over 45% of businesses struggle with late payments and almost three quarters of them said this made their cashflow difficult to manage.
Here are some straight-forward solutions to ensuring you receive your payment on time:
1. Agree payment terms
Make expectations clear by stating your costs and payment terms on the contract and ensure your client agrees before starting work.
Ensure all involved parties agree on payment terms before any work goes ahead or goods are delivered, so it will be far easier to chase your customer once invoices are due. Proof of their agreement to your terms and conditions will make your case much stronger if they cause delays.
2. Multiple payment options
Having the ability to accept different forms of payment, including digital payment platforms such as Paypal, Worldpay or Stripe, will increase the potential to get paid on time, without giving your customers an excuse to delay what you are owed.
3. Upfront payment system
Ask for an upfront deposit or set up a payment scheme. This involves taking a proportion of the cost before work commences and is an effective, yet reasonable way to set boundaries for your customer. Equally, a reduction in the due balance once the work is complete could also have a positive impact on their ability to pay.
4. Enforce payment terms
Stick to your conditions if your clients do not pay within your agreed, specified time limit. Make sure your invoices clearly state what will happen when payment is delayed: whether that means charging interest, reporting them to the relevant parties or in extreme cases, taking legal action.
5. Prompt Payment Code
The Prompt Payment Code was set up by the Department of Business, Enterprise and Innovation and encourages best practices between organisations and their suppliers. Signatories to the Code commit to paying their suppliers within clearly defined terms and to ensuring there is a proper process for dealing with any issues arising.
This code gives suppliers the opportunity to build stronger relationships with their customers, safe in the knowledge that they will be paid, and confident that they are working with a business that values the service they deliver.
6. Use invoice finance
Invoice finance works by providing immediate access to your money as soon as you raise an invoice, improving cash flow and helping your business thrive.
Using invoice discounting or factoring supports businesses who may encounter late payments or must navigate seasonal changes in demand for their goods and services. This type of funding often gives businesses headroom and flexibility that were previously unattainable and offers opportunity for investment.
For further peace of mind, you could also sign up for bad debt protection which ensures you get paid for your work, even if your credit approved customers get into difficulty.
