There are other, more advanced techniques, such as using the threat of the Late Payment of Commercial Debts (Interest) Act, but incredibly many firms don’t even cover these absolutely essential steps.
1. Agree clear payment terms from the outset
Have definite deadlines and make sure you have proof of the intent to purchase, for example with a signed purchase order or order form, for your records. This will also be helpful if you find yourself chasing payment via more formal channels later down the line
2. Retain an auditable record of customer interactions
This will mean you have something to refer to whilst trying to use systems that are compatible with the payer’s internal system. Nothing delays payment quite like sending an invoice or document in a format the recipient cannot work with.
3. Ensure that all the relevant information needed to complete the transaction is available to the recipient
This includes a VAT number, billing address and bank account details. Delays are often experienced when the parties have to continuously trade communication in order to confirm these basic details
4. Embrace the technology products available that can help your company do business faster
Technology has massively changed the way we work and interact with customers and suppliers and companies should look at adopting some of these products in order to speed up transactions. The rise of cloud technology means that businesses can use products to speed up processes from contract signing to invoicing and payment collection
5. Speed is of the essence!
Use an invoicing system that will reach the intended recipient as fast as possible, whilst also making it simple for them to return the relevant information to you in a similarly expedient manner.
6. Investigate credit ratings
This should be the most basic step before dealing with a new customer and yet is often overlooked, particularly by SMEs. Companies such as Experian and Credit Safe can provide useful background on a business’ credit history and can help dictate your payment terms by identifying those companies that have a murky credit history.
These are six simple steps that a business can follow in order to reduce its exposure to late payment. In this age of globalisation, the business environment has never moved at a faster pace than it does today and the companies that recognise this and maintain systems that help their finances remain liquid will continue to thrive.
Jesper Frederiksen is EMEA General Manager of DocuSign.
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