The late payment of invoices can cause problems for small businesses. Ensuring that your customers pay on time is crucial to the long-term success of a company. Having the right amount of cash in the bank will prevent your business from getting into financial difficulties. Here we look at how you can manage debtors to keep the cash flowing.
The right payment terms
Don’t just presume that you need to have 30-day payment terms on your invoices. Giving your customer longer to pay, could just result in more overdue invoices. Insisting on 7, 10 or 14-day payment terms might be more suitable for your business. You could even consider cash on delivery, requesting a deposit or part-payment and having progressive payments for longer jobs.
Make your payment terms clear
Often the reason for the late payment of invoices is because customers weren’t clear about when it was due. The terms need to be clearly set out on your invoices, quotes or contracts and make sure you discuss them with new customers. This will save any ambiguity and make it much easier to get your invoices paid on time.
Have the right information on your invoices
Invoices can get lost in companies when they aren’t addressed to the correct person. Ensure that you have the correct name (usually someone in accounts) and the appropriate email address. Where invoices are correctly laid out and include all the relevant information, they are more likely to be paid on time. Depending on the type of work, this could include a job number., reference number, breakdown of labour or materials, price per unit or descriptions of the work.
Be prompt
Don’t wait till the end of the week or month to send out invoices. Once the job has been completed make sure an invoice is sent. The longer you wait, the longer it will be before your customer pays.
Make payment easy
Accounts departments want to receive an invoice and quickly see what it’s for and how to pay. The payment options available should be clear on your invoices, with the appropriate bank account details or cheque requirements. It’s useful to offer customers a range of ways to pay, dependent on their circumstances. For instance, most larger organisations will prefer to do online bank payments, whereas for smaller companies cash or card payments might be beneficial.
Don’t be afraid to remind clients
It can be stressful having to chase overdue invoices, but regularly reminding clients is an effective means of getting paid. When an invoice becomes late send a polite reminder and make sure you follow-up if there’s still no payment. Don’t be afraid to pick up the phone and speak to your customer. There might be a reason why the invoice is unpaid and often a quick conversation can rectify the situation.
Manage debtors to keep on top of cash flow
Business debt recovery can seem like a complicated process, but it doesn’t need to be. If you have the right systems in place, it’ll be quicker to chase overdue invoices and your cash flow will benefit.
There are software packages available that enable you to automate the whole invoicing process. This allows you to tailor invoices for individual clients, reduce the amount of data inputted and see exactly which invoices are outstanding.
Business debt recovery companies
There may be some occasions where it’s necessary to call in a dedicated business debt collection company, such as CEA Ltd. We have a team of debt recovery specialists who can help to collect unpaid invoices.
Late payments can be particularly damaging to small businesses and lack of cash flow is a factor in my liquidation cases. Before it gets to this stage, we start chasing overdue invoices, reminding your customers about the payment terms and getting what is rightfully yours.
For cases where customers are still refusing to pay and the invoices haven’t been disputed, we can take your business debt through to a court judgement and enforcement.
To find out more about our business debt recovery service contact us today.