Getting Your Head Around Late Payments

Unfortunately, managing late payments is part and parcel of running a business. In fact, the average small UK business has to wait a staggering 71 days until their invoices are paid. That’s not much fun.

Unless you’re in the business of making some altruistic interest-free loans (you’re not), then you need to know how to handle late payments. Small business owners are in a tough predicament here, and no, it’s not fair. But it is business life. So what can you do about it?

Be the Boss

The number one favour you can do yourself when dealing with invoice payments is to be professional and remember you’re in charge. You’re a dab hand at doing this in every other area of your business, and this is no different. You’re in the right, remember that. Set the tone by creating a late payment policy and procedure which goes to all new clients.

Additionally make your payment terms clear on your invoices. This will include important information such as the time period within which you expect payment, and any interest which will be levied in the event of late payment. For information on how much interest you can charge, see the Government Guidelines on late payment here.

However, even with the right attitude, it can become a time consuming task to even identify when invoices become late, and to chase them. You can be sat wasting your time flicking through your diary, and tallying it to your bookkeeping spreadsheet.

If you had some software to do that bit automatically for you, that would be great wouldn’t it? Pandle can automate the process of chasing and reminding clients for you.

So, get a good diarising and reminder system in place, and you’re part way there. In our experience the majority of invoices aren’t paid on time due to disorganisation and a slippery mind, rather than a desire to deprive you of your hard-earned cash.

What if the Reminder Fails?

Of course, there are those who simply don’t pay on time, no matter how friendly and professional your reminder service is. Unfortunately, these are the tricky customers who need a tougher line. This is particularly tough if you want to keep their business.

There are a few different options you can take. Firstly, if they want more work done then you can insist that they settle their debts first.

You can also insist on a different payment system going forward. For example, you can insist that they pay a certain percentage as a deposit if you don’t already do this.

Other options include selling your invoices and getting someone else to do the chasing for you known as invoice factoring (an important option if you need the cash, but you won’t get anything like what you’re owed), or pursuing a claim for payment legally, perhaps through the small claims court.

Accept It’s Part of the Job

Whilst managing late payments shouldn’t be part of anyone’s job, the reality is that they are. You need to adapt your mind set to accept this, and depersonalise the process. By using your bookkeeping software to take out a lot of the legwork, this is easier.

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