9 Tips To Get Paid Faster

In a business, getting paid late is frustrating and potentially fatal. Many businesses fail each year due to cashflow issues typically exasperated by late payers.

In a Xero’s Small Business survey, it revealed that nearly half of invoices are paid late. Unfortunately, this hits smaller businesses, the least able to afford it, harder. According to AFBA (the Asset Based Finance Association), companies with a turnover of less than £1m wait, on average 71 days for payments. The largest companies have the shortest wait at 38 days.

Businesses need to get paid faster. There have been numerous campaigns to ensure businesses are paid within 30 days including Pay on Time

1. Have a clear set of terms and conditions.

This is something every business needs. It looks professional and makes it considerably easier to chase debtors. If you are selling goods, it is vital that you include a clause that starts you continue to own them until they have been paid for in full. You should also have a clause that requires customers to notify you of any delivery problems or quality issues immediately.

With services, it is usual for the supplier to ask for part payment up-front with the rest on delivery. It is vital that you state how many days after delivery the invoice must be paid. This needs to be long enough for the client to review and give feedback but it does need to be stated. Some businesses with cash flow issues stall signing off on work they are happy with simply to delay payment. It can also lead to them picking minor issues to avoid paying.

2. Review and Adjust Payment Terms and Pricing accordingly

Review the duration you give your customers or clients to make their payments. If there’s a chance that you can shorten the duration, it might help you get payments faster. You can also offer discounts for early payments, a move that would urge clients to pay earlier, if not on time. The best way to offer to do this is to increase your prices so your discounted price matches your current one. Those paying late pay a higher price because they have kept you waiting. It is best to do it this way, as

• Some businesses will insist on paying only the discounted price even when they pay late.
• A discount for early payment is easier for a client to accept than a penalty for late payment.

It is also easy to say to existing customers that you have had to increase your prices but you are keeping them the same for those who pay early. This is a win-win situation. You should review your payments and pricing regularly and adjust accordingly. Review and check your payments and pricing every now and then to know where you can make adjustments. But, make sure to update your customers if you’d do make changes.

3. Know Your Customers

It is important that you do your research on new customers. You must know:

• Their name- some businesses don’t know the correct name of the companies they supply
• Their trading entity- e.g. sole trader, partnership or a limited company
• Their correct address

You need this basic information if you need to take them to Court for non-payment. You should also know their credit rating and set appropriate limits. You might want to ask for money on account or personal guarantees in some cases.A company’s credit report can now be accessed to make sure that they are legitimate. It is always worth spending time checking out a company before extending them credit.

4. Ensure You are Invoicing Correctly

You need to find out:

• If you need a Purchase Order number on your invoice. Many companies require this and will not pay your invoice without one.
• Where to send your invoice. Many companies mistakenly send their invoice to the buyer when it should go to the Finance Department.

5. Invoice Promptly

You should issue your invoice within 24 hours of the delivery of your goods or services. Many businesses invoice late.

6. Follow-up Your Invoice

You must then follow-up your invoice to:

• Ensure your client received it. Invoices can and do go missing in the post or in the electronic ether.
• Confirm that there are no problems with your goods or services. Companies will not pay you until any disputes or problems have been resolved.

• It is good practice to follow up invoices.

7. Get in Touch and Always Remind Clients

When a client is already late in paying, don’t wait for another two weeks to remind them of the invoice. A friendly email when due date is already approaching would be a great idea. Then a follow-up email when payment is late will also work. If you still cannot get any response, make a call. Invoicing software can also set automatic payment reminders. You should have a clear collection process in place.

8. Have and Follow a Debt Collection Policy

You need to have a debt collection policy that you follow for every client. You must know what to do and when if someone is late in paying you including:

• The exact steps you take to recover the debt. This could include a final phone call or chasing letter.
• How you are going to address the issue with them so it does not occur again
• How their late payment affects their future credit with you

• Many companies forget the final steps and continue to fulfil large orders in the hope that their customers will start paying on time. In reality, many customers take this as a sign that you are fine with late payments.

9. Make It Easy for Them to Pay

Give your customers more ways to pay. Make it easy for them to pay and they might do it faster if given more options. This is especially true if they are struggling to pay. If you can accept credit cards or PayPal, this can make it much easier for them to pay.

If you need help with tracking your clients’ payments, we can always help you. Contact us now through accounts@nayloraccountancy.com or call us at 44 (0) 1892 807 001.