Cash flow is an important factor for any business – no matter how big or small. Late invoice payments can have a serious impact on the viability of a company.
It’s important that you have a process in place for managing late invoice payments. This ensures that the problem doesn’t get out of control and customers don’t end up with massive debts.
Here are our top tips for managing your debtors to help limit the number of unpaid invoices.
Check new customers
Before you take on a new client it’s important to run a few simple checks. Conduct a credit check before opening an account to make sure they’re not in trouble. This could also be useful if you think an existing customer is in financial difficulties.
Know your payment terms
If your customer doesn’t know your credit terms this could result in late invoice payments. Be clear from the outset about payment timeframes.
Encourage electronic payments
Electronic bank transfers make the payment system much quicker and easier.
Follow up with customers
After you’ve sent an invoice to a new customer, or where it’s unusually large, contact them to check there are no queries. This is good practice to get into and will encourage faster payments.
Don’t delay in chasing debtors
When an invoice is late start chasing it straight away. The longer you hold off the later it will become and the more debt the customer could be building up. Often a simple phone call will lead to your invoice being paid.
Use a third-party agency
Sometimes it can be hard to contact your own clients to chase overdue invoices. It’s also time-consuming, particularly for smaller businesses. Outsourcing your debts to a third-party company takes away the stress of commercial debt recovery. At CEA Ltd we can help with unpaid invoices and give you more time to concentrate on your business. For pre-judgement B2B debts (invoiced to limited companies, plcs and partnerships) this is a free service. Find out more about our free debt recovery service here.
Consider flexible payments
Sometimes businesses can be going through a tough trading period and may not be able to pay off an invoice in full. It may require some flexibility on your payment terms. This could include setting up a monthly payment plan or allowing them to pay off the invoice in a couple of lump sums.
Don’t let the debt build up
Businesses can get into serious financial problems if you continue allowing a customer to build up a debt, even when they are not paying off their invoices. Don’t be afraid to stop supplying them with your products or services. This may give them the push they need to pay the outstanding invoices.
If you have outstanding business debts that you need recovering, contact our team today to find out more about how we can help.