Many employees would create mayhem if their salaries were delayed because of the potential financial problems that go with it. Many people survive from payday to payday.
It’s no different for SMEs, many are still struggling with the effects of the COVID-19 pandemic, like labour and supply chain shortages. So late payments can have a dramatic effect, not just on a particular company, but also on other firms they do business with.
The most obvious benefit of getting paid on time is the cash flow, so firms do not have to waste their time managing debtors and chasing invoices. That can relieve the constant stress of balancing the books, and dreading your own bills dropping through the door.
For those businesses, who unfortunately suffer at the hands of late payers, the Small Business Commissioner, has compiled some advice:
Agree to clear payment terms
Make your payment terms clear to your client – this should be in writing, ideally in the form of a contract.
Keep payment terms short
The payment term that you set should be as short as possible but be realistic. if you want to be paid in 30 days, you have to set your payment terms at around 14 days.
Get invoices out as soon as possible
Invoicing should be a priority in any business, so get them out as soon as possible.
If you e-invoice set a ‘read’ receipt
If you are invoicing your client electronically setting a read receipt is a simple but effective way of getting confirmation that they’ve received your invoice.
Send the invoice to the person who pays the bill
The person who pays the bill might not be the owner of the business, or the person that you deal with, but you should always copy them in on any invoices that you send. In other words, send your invoices to both the person who authorises the payment and the person who actually processes it.
Make sure your invoice is accurate and easy to understand
Queries delay payments. Avoid queries by making sure your invoice is accurate, straightforward and contains all the correct information – including the purchase order number.
Include your bank details
Make it as easy as possible for your client to pay by putting your bank details on your invoice. You should also consider giving your clients as many options for paying as possible.
Follow up promptly
This involves sending reminders and then making phone calls. Nobody likes making these sorts of calls, but they are essential if you want to get paid as quickly as possible. Call early in the day, call often, but always remain polite and professional, but firm.
Add overdue fees
You can also consider adding overdue fees to your invoices to discourage your clients from paying you late. This is a statutory entitlement.
Get advice today
For help and advice with related matters, please get in touch with our team today.