Cash flow & late payment headaches?
Getting paid quickly…
Late payments are one of the biggest challenges facing SMEs in the UK today, and a problem JGBC helps businesses with all the time. According to a report commissioned by Ultimate Finance, 81% of small business owners say that late payments are an issue for them.
Getting late payments from customers means the difference between your business surviving or going bust. Most small business owners think that making a profit is the main goal. In truth, this means nothing if your cashflow is struggling and the profit isn’t being banked.
Most big businesses can survive for a few years making a loss, but when they run out of cash, the real problems start. Unfortunately for small and start up businesses this isn’t always the case. Late payments threaten the survival of smaller businesses and ultimately cause many businesses to fail.
While you wait for your invoices to be paid by your customers, you still have bills of your own to worry about. Poor cash flow can impact on the terms you are offered by your suppliers, your credit rating and your very existence.
Fortunately, there are simple steps you can take to ensure that you’re more likely to be paid on time.
1. Be Polite
Amazingly, FreshBooks found in research they carried out that having the words “please” and “thank you” on your invoices can increase the chance of being paid by 5%!
2. Agree terms before the sale
Make sure that your customer is aware of your payment terms before you make the sale. Many businesses expect 30 or even 60 days payment terms. If this isn’t the case, you need to be clear. Also consider writing your invoices in plain English. Many business owners understand what net 30 means, but those newer to business may not. Reworking it to “payments are due within 30 days” can help.
3. Have a range of payment options
The more ways you offer to pay your invoice, the easier it is for the customer. If you don’t already offer an online option then it’s something worth considering. Paypal, Stripe and even GoCardless all work well with many accounting packages on the market.
4. Don’t wait until it’s overdue
Make a point of starting to chase invoices up before they become due. A quick email the day before an invoice is due can serve to remind the customer. This means that your invoice can get pushed to the top of the pile for payment.
5. Charge interest
If you don’t already charge interest on late payments then it’s something to consider. The law says you can charge an interest of 8% plus the Bank of England base rate for business to business transactions (statutory interest). It’s always helpful to have this on your invoice as it psychologically helps your customer to prioritise.
6. Get help
If you are still struggling with your cash flow and late payments JGBC offers credit control services, and will deliver an end to end service where invoices are issued followed by statements, followed by payments or reminders and then payments which will put an end to your late payment headaches.
Above are six simple steps that will help to improve your chances of getting paid on time more often. Late payments still a problem? Want to find out more about JGBC’s credit control services? Visit JGBC bookkeeping page for more details.