How to nip late payments in the bud
Chasing late payment of invoices doesn’t have to be the bane of your business, says Nikolai Naylor.
Late payments are a nuisance for any small business; chasing payment of monies owed for work that has already been carried out is a timely and frustrating process we could all do without.
Recent research by YouGov has revealed the true extent of the problem in the UK with 60 per cent of SMEs backing a change in the law that would introduce a 45-day minimum payment term.
The survey questioned 2,000 small businesses with less than 250 members of staff. The results revealed that a quarter of these businesses had their financial viability put at risk by late payment. Of that number, half had been forced to use their personal finances to keep their business afloat.
However, there are ways you can help speed up the invoice payment process and avoid unnecessary detrimental impact to your business.
The sooner you send you invoice, the sooner it can be paid. With cloud-based accounting software such as Xero, which is our preferred software, you can send invoices directly from your phone so you can literally invoice on the run.
Attention to detail
Avoid customers having to come back to you for any additional information they may need in order to make payment, such as a purchase order number. By making sure your invoices are as detailed as possible customers will not be able to use this as an excuse to defer payment.
Set a payment deadline
If you don’t have a payment deadline, or you do but your customer isn’t aware of it, then they are less likely to pay an invoice promptly. Make sure you include full payment terms on all your invoices. You could also charge late payment fees if there is a delay in settlement or offer a discount for speedy payments.
The easier you make it for your customers to pay an invoice, the more likely that they will pay promptly. Give them a variety of ways to pay and bear in mind that businesses offering online payment services, such as Paypal, generally get paid quicker.
Online and cloud-based accounting software like Xero enable you to see when invoices you send to your customers have been opened and paid. You can also set up your software so a reminder is automatically created and sent to customers if they have not paid an invoice and the due date is approaching.