How improving payment practices helps you to get paid
Late payments, compounded by lengthy payment terms, present a challenge for businesses to operate effectively, impacting on cashflow. This means less time for business owners to focus on developing their business and investing in growth.
If you don’t have the right payment practices for making sure customers pay you on time, you’re limiting your growth and reducing your profitability. We understand the challenges of collecting payments from customers and the impact of late payments, particularly to SMEs.
A positive step to getting paid is to have clear steps you can take to encourage customers to pay promptly, and to limit the impact of late payment when it does happen.
Let’s talk about preventative measures to keep late or missed payments to a minimum
- Meet basic requirements: When you take on new customers check them first for potential credit risk and where possible, ask to see their current or previous year balance sheet.
- Get a purchase order: If your customers operate a purchase order system, make sure you get one. Without it, payments are almost inevitably going to be difficult and delayed.
- Make your payment terms clear: It may sound obvious, but you need to give your customers a deadline for when you expect payment. You can’t expect timely payments if they don’t know what the timescale is.
- Get organised: There’s no point in hoping you’ll get paid if your own invoices are not sent promptly and correctly. Send invoices soon after the job has been completed and stick to a regular payment schedule. identify any potential issues, keep up-to-date records and take steps to resolve as soon as possible.
- Provide flexible payment options: Don't put any obstacles in your way, make it as easy as possible for people to pay you. Giving various payment options gives your customers more reasons to pay you easily and on time.
- Know your customers: Pro-actively and regularly communicate with your customers to help reduce your time and effort, if and when payments are late or missed.
- Make customer service a priority: Providing a great experience isn’t just the right thing to do, it makes financial sense for your business as you’re more likely to be paid for the work you’ve done if your customer is happy.
- Offer early payment discounts: Incentives can motivate your [clients/customers] to pay early, even if it’s just a small discount of 2% if paid within ten days. Not only is it a great way to encourage speedy payment and maintain your cashflow, but it could also lead to a more long-term relationship.
While you can never guarantee that every single customer will pay a bill on time, reducing the time and money you spend on recovering late payments is something that all businesses, regardless of size and sector, can achieve with a little pre-planning.
Find out how invoice factoring can help you avoid late payment issues. We manage your credit control, which saves you time and money chasing and collecting outstanding invoice payments.