With forecasts for our economic climate currently somewhere between gloomy or overcast with a slight chance of growth, it’s easy to see why. All this being said, it’s little surprise we now begin to see businesses tighten purse strings, become more cautious and take that little bit longer to pay bills.
If the recession in years of the late noughties taught us anything it was, “cash is king”. Chasing down late payments is an endemic problem for SMEs at the best of times but, with economic uncertainty rife it now needs to be a post-Brexit priority for business owners to ensure their company remains healthy.
Our late payment culture in the UK can have a significant impact on a business’s cash flow and overall performance as payments are often delayed. At some point or another it is inevitable that as a business owner you will have your fingers burnt by late payments but once it’s happened, what can you do?
Here are some crucial steps to take to insulate your business against the associated issues of late payments and if you’re owed money how to get it.
Keep communication lines open
If a payment becomes overdue, the first thing you need to do is communicate with your customer. At this stage, your customer should have received your invoice, plus a follow up email to remind them that their payment is due. If it is past payment, try contacting them again to see if they do have plans in motion to get your money to you.
Working together with customers who are struggling to pay you can be more beneficial than arguing with them and demanding money immediately or threatening legal action.
By keeping communication streams open and allowing a bit of leeway, there is more chance of retrieving your money than if the relationship turns sour. Remember, communication is key.
If you haven’t previously credit checked your customer, do it now. Firstly, check their Days Beyond Terms (DBT) to see how long they usually take to pay their bills. If you feel you can’t do business with a company who will always pay you late, you could either adjust your cash flow to accommodate their payment terms next month, or you could try cutting the payment terms to a shorter term.
For example, if the company’s DBT is ten days, and you want to get paid within 30 days, you could change your invoice term to 20 or less days. If none of these options are appealing to you, you may have to stop doing business with them all together. Their company credit report will give you all the information you need to make this decision.
Continue reading on the next page for the remaining measures that can be taken to manage debt recovery and the precautions that can be taken in the future.
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