Late payment is the #1 problem for U.K. SMEs, that is representing more than £50 billion. However, there a few steps that any business can take in order to fix the overdue invoices.
Step 1: Agree your terms
Before commencing your work establish the following terms:
– When you expect to be paid
– How you expect to be paid
– What happens if customers don’t pay on time
Being upfront about this emphasizes your professional attitude. Most quoting software allows you to include your terms and obtain a signature to secure an enforceable contract. If you are unsure, it’s best to seek legal advice to ensure your agreements are rock solid and enforceable, in case you face a dispute or non-payment. It’s a good idea to consult with others in your industry, including governing and supporting bodies. They often have field-tested Terms of Business templates ready to go. Some of these bodies are:
– Industry Associations
– Chamber of Commerce
– Smal Business Associations
Step 2: Get your invoice right
One in three overdue invoices remain unpaid due to mistakes with the invoice itself such as:
– No payment instructions
– Invoice sent to the wrong person
– Invoice items or amounts are incorrect
It is also beneficial to ask your customer when they normally settle their bills. Invoice promptly and ensure your due date falls in line with your customers’ payment run. Most businesses tend to settle their bills between the 25th and the 31st of the month once their own customers have paid. Make sure your invoice is ready and waiting for them well before the end of the month. For your larger customers, it’s often a good idea to phone them before their payment run to ensure they’ve received your invoice and confirm there’s nothing out of order that would prevent it from being paid.
Step 3: Build rapport
When push comes to shove, people will pay those they get along with first. Having a close relationship with your biggest customers (or the person that pays the bills) goes a long way to accelerating your invoice to the top of the pile. Sometimes they’ll move mountains to get your invoice paid early. Wouldn’t that be nice! However, building rapport can be difficult for high volume or commodity products. In this case, you’ll do well to keep your invoices andautomated reminders friendly, or even fun, so they strengthen relationships, and don’t erode them.
Step 4: Do a great job
Four out of five business owners surveyed said ‘a job well done’ makes them more likely to pay a supplier on time. On the flipside, not paying an invoice is an excellent way (and sometimes the only way) for a customer to signal they’re unhappy with what was delivered.
It’s also worth noting that some products and services (or ‘grudge purchases’) are more likely to be paid late than others:
– Waste disposal
– Accounting and legal fees
– Unexpected bills such as repairs to computers
If you’re in one of these categories, you need ensure your terms of business are solid, and implement a regimented follow up system.
Step 5: Follow up until paid
If you’re not following up, then it’s your business that will end up paying.
There’s myriad of reasons (or excuses) for unpaid invoices… it’s no wonder that almost 90% are paid late. Six out of these seven reasons can be resolved with a quick follow up email or phone call. It’s what the best receivables professionals do, because they know it works.
Bottom line is, your business bottom line matters. If you’re not following up, you will be paid late, and in some cases, you increase your risk of not being paid at all.