We all have them – the client that never seems to be able to pay on time. But there are steps you can take to halt late payments, allowing you to get back to business.
On average, small businesses were paid ten days late in 2017.
According to businessadvice.co.uk, SMEs were paid an average of ten days late for invoices issued in 2017. As a result, half of SME’s experienced negative cash flow at some point during the year.
But even worse, FTSE 350 firms paid smaller businesses over two weeks late. For 30 day terms, this equated to receiving payments after 46 days.
In some ways, it may be comforting that you are not alone in suffering late payments. However, it doesn’t help you run your business efficiently.
So, what do late payments mean for your business?
Quite honestly, the impact is devastating. This may sound dramatic, but there is plenty of evidence in the UK marketplace.
The ‘Invoice Utopia’ Report, which surveyed over 1000 businesses, found that 23% of business closures were a direct consequence of late payments. This equates to 353,000 jobs lost every year, or £549 million lost through taxation capital.
Businesses were forced to take the following steps due to late invoice payments:
So, what can you do to reduce the impact on your business?
Here are three practical steps that you can start with:
1. Make sure you understand your supplier’s ordering system.
For example, do they operate a purchase order system? If so, make sure you have fully understood the process so that payment isn’t held up by inaccuracies. Also, make sure you have the correct contact information for whoever will be processing the invoices.
2. Understand your right to claim interest on late payments, and use it!
Make it clear on your invoice that you will use this right, and stick to your guns. Eventually, the supplier will understand that if they don’t pay on time, they will end up paying more. For further information on claiming interest, I recommend you visit the gov.uk website.
3. Have a thorough credit control system in place and make sure you keep on top of it.
For ideas and tips on how to do this, visit our blog post “How to improve your credit control in 5 simple steps.”
If you would like help with getting your unpaid invoices under control, then get in touch or follow us on Facebook and Twitter for regular top tips and helpful articles.