How to reduce late payments
Late payments can cause a variety of issues for businesses, most notably cashflow problems. For any business, cashflow is an essential part of its success; if the money isn’t coming in, but it’s still going out then there’s every risk of failure.
Within research conducted by Xero and Paypal, they found that “37% of small business owners have considered closing their company because of cash flow issues caused by late payments”. For this reason, we wanted to supply ways in which you can reduce late payments and keep your business alive.
There are a number of ways that you can decrease the chances of receiving late payments and these are highlighted below:
Provide multiple options for people to pay you
As we all know, people like options and if it makes it easier for them to pay you then this most likely will mean that they will pay you faster. Be sure to offer plenty of options upon invoice of different ways the client can pay you.
Put a contract in place
If there is a contract in place between you and other parties from the outset setting out payment terms then it is easier to demand the payment once it is due as it is legally enforceable. Again from a legal standpoint, this also covers you if your customers stall payment for too long and you decide to take things further since you have proof of what terms were agreed prior to you commencing the working relationship.
Charge late payment fees
Within your contract you can highlight that if your customers pay late then they shall be charged late payment fees. This will deter clients from paying you late for obvious reasons and if they do, then at least you have some compensation on top of the initial fee for the wait you’ve had to endure.
Send invoices out more than once
Have set days of the month where you send your initial invoice and then follow it up half way through the payment period with a reminder invoice. Some people genuinely do forget that invoice is due, so it’s just a polite reminder that you are going to need paying soon.
Start collecting via Direct Debit
If you want to get rid of any hassle of invoicing and awaiting the payment, then why not go for something that will be able to collect the money from your client at a time that you’ve both agreed to. This reduces the manual tasks needed by both parties after the initial agreement has been signed as payments can be automated. From your businesses point of view, it benefits you as the payments are coming in on time and cashflow can be forecasted more accurately, but it also benefits your customer as they don’t have to remember to make a payment.
With over 20 years’ experience, SmartDebit are the UK’s leading Direct Debit Service provider. Get in touch today to find out how we could minimise late payments within your company.