Here at Akoni we are aware that late payments are really stressful for small businesses trying to keep the cash flowing. Late payments hinder a company’s ability to expand, even when sales are high, as they spend their valuable time chasing money owed. SMEs are sometimes nervous to chase payments for fear of jeopardizing their relationships with clients. Here are 10 tips on how to reduce late payments and help ensure a healthy cash flow.
Know your customers
Credit checks are valuable and can save you a lot of time and money in the future. Checks can be made easily and quickly online. You can also use credit checks on long term customers where you suspect they may have issues paying their bill.
Always be clear about your payment terms and conditions
Make sure these terms are clearly printed on your invoice to avoid any ambiguity, easily available on your website and readily available to email out to a client when needed. Check with your trade association for typical terms and conditions used in your industry. Before entering into the contract ask your legal team to review the conditions
Have a payment remind process in place
Once payment has not been received on the date due, call the customer and follow up with a written reminder that payment is due within a reasonable timeframe. If the customer still does not pay then send out a warning. Eventually you will need to send out a formal written warning asking for payments within two days before legal proceedings are followed.
Introduce flexible payment options
Pre-agreed instalments are an excellent way to introduce flexible payment options to your customers.
Make a courtesy call
If they have had a rather large order, call them before payment is due to make sure everything was received and there are no issues. This should prevent any delays in payment and is seen as good customer service.
Incentivise customers with early payment discounts and late payment charges
Supplier invoice payment terms often include an incentive to pay early by offering an early settlement discount if the invoice is paid before its due date. For example a 1% settlement discount if paid within 10 days. The full amount must be paid within 30 days. The late payment of Commercial Debts (interest) Act 1998 allows small businesses with less than 50 employees to claim interest on overdue payments.
Deliver all invoices and statements electronically
This will ensure that the customers receive the invoice in the quickest time. There is a record of when the invoice was sent, received and read by the customer. Electronic delivery also frees up staff to work on chasing late payments instead of printing, writing, stamping and posting the invoice.
Make sure your invoice is going to the correct place
Always ask for a purchasing order number or a name where the invoice can be sent directly to, to avoid it being lost in the mailroom, or work mailbox.
Always get your customer to sign receipts
In the first instance ask for a company stamp on the receipt, then a signature from the customer. This verifies that the customer was in agreement with the order. Ensure that they have the correct authority to place the order.
Bill quickly after delivery
To avoid any delay in payments, don’t forget to include all important information on the bill, your company payment details and the customer’s full details.
Whether you are a new startup company or a company that has been running for years, it's good practice to review your late payment procedures regularly, to get on top of recurrent late payment offenders and avoid new ones.
It’s important to be better organised as a company - to control cashflow and avoid late payments and bad debts.
Akoni helps businesses make the most of their cash. Register for free at AkoniHub.com