Late or missed payments are a perennial challenge for businesses of all sizes.
If you are running a start-up or growing a business, too many missed or late payments can impact cash flow and become a major problem.
In some cases, a persistent problem with late or missed payments can even threaten the future viability of the business.
Tackling the problem needs a systematic approach to invoicing, payments, and debt collection.
So, Credit Control Manager, Andrea Hooper, offers her advice on how companies can reduce the impact of late or missed payments.
Establish clear payment terms.
Payment terms need to be established early on.
Clients who buy your products, or hire your services, should know when payment is due before they enter a contract. As soon as a purchase is made, or a contract is signed, you should remind the payment terms.
A range of payment terms should be offered with links for easy online payment. If this is something your business can weather, consider offering a reduction in money due if someone pays before the due date (with the reduction automatically calculated when someone pays online).
Consider credit checks and deposit payments.
Depending on the nature of your business and the value of the products and services you sell, it may be appropriate to undertake a credit check before offering payment terms to new customers/clients.
A deposit payment may be appropriate for larger invoices before agreeing to supply products and services.
Set up automatic payments.
Wherever possible, encourage customers to set up automatic payments for goods and services they purchase from your business.
You could establish this in several ways, such as via direct debit or online payment services such as PayPal.
Send a reminder before the due date.
To encourage your clients to pay promptly, email reminders should be sent as the due date approaches.
This could be a week or a few days before the due date containing a link to facilitate easy online payment.
Send reminders for overdue payments.
Reminders should automatically be sent as soon as the due date has passed. This can be via letter or email containing an invoice and a reminder of your payment terms and methods.
A schedule for payment reminders should be established to clarify what will happen for continual non-payment.
Establish the reason for the payment being delayed as early as possible. A phone call is sometimes the best way to communicate with your client. It adds a personal touch and helps maintain the relationship rather than the use of email/letters which can be too impersonal and easily ignored.
Having an experienced Credit Controller can sometimes be the difference in getting the payment while maintaining a good ongoing relationship with your client.
Have a legal/debt collection policy in place.
Few companies relish having to take legal action against late or non-payers, but sometimes it can’t be avoided.
Your company should establish a clear policy as to how a legal/debt collection route will be triggered, which should be made clear to customers from the beginning. Legal and debt collection services should be in place to assist you when required.
By ensuring good communications, clear policies and regular reminders, the need to take drastic measures will be reduced.
How Wilder Coe can help
Whether you’re a start-up or a growing business, ensuring you have a system to handle late or missed payments is crucial to business success.
Our team of experienced advisors can provide the services you need, from general business advice to a comprehensive outsourcing service.
Contact Andrea Hooper for advice on handling late or missed payments at andrea.hooper@wildercoe.co.uk
