Are you a small business owner in the UK? Then you may be one of the 53% that are owed money from late payments which total £586bn in the UK as reported by Lloyds Bank Commercial Banking.
There are ways to reduce the risk of these late payments creating a real cash flow danger to your business, Steve Duetsch, Chief Executive of Wesleyan Bank gives some advice:
Manage your clients
Always establish a new customer’s financial position before offering credit terms. This can be done by requesting a copy of their latest filed accounts, asking for trade references or utilising a specialist agency to check. Agree payment terms and state these clearly on statements and invoices.
Invoice on time
If you don’t invoice, your customers can’t pay! Think about removing paper based systems and introduce electronic systems, which ensure the client receives their invoices.
Take decisive action
Outstanding invoices should be chased immediately and set up a system where a chain of communication is kept to. You may have to stop working for them until previous payments have been settled.
Claim interest on late payments
Businesses can claim interest on late payments up to 8% above the Bank of England’s base rate (currently 0.25%).
Use alternative finance solutions
There are some deadlines that can’t be ignored such as paying VAT and tax bills. Increasingly small businesses are raising money from the alternative finance sector in tailored products that can spread the cost of their liabilities.
Make it easy for customers to pay
For very small business, technology can help, some online accounting package invoices, when emailed, will have a pay now button, which directly links to a payment facility. Small businesses such as plumbers/electricians can get paid instantly by credit card out and about. Technology is making it easier to accept payments wherever you are.
Spread the cost for your customer
By introducing monthly direct debits and spreading the cost, it helps both your customers’ and your own cash flow.
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