
The learning curve
Lindsey Fish from B2B events company Little Fish Event Management has a couple of clients that often pay their fees about a month or so late. However, she acknowledges that they are good clients that give her lots of work, so there’s a trade-off. “I put up with that because I know it’s coming,” she reasoned. Where Little Fish’s real problem lies is with clients whose contracts are coming to an end and they neglect their final invoices. Once Fish has delivered the client has no incentive to pay up. “That job means more to us than it would to a larger firm. It angers me and it causes me a lot of distress.” One such job remains unpaid from February 2015. The job itself was more of a freelance role, and although Fish positions herself as an agency, the business was only six months old at the time and she was keen to take on work. “It’s a learning curve regarding the clients that I work with really. At the very beginning you don’t want to turn down work even though you get a gut feeling that it’s not the kind of job that you set out to do.”Taking charge
Pearson recommended contacting clients the minute an invoice has gone out – to check it has been received and that all necessary information is present and correct. Small businesses should then make it a priority to keep track of due dates and chase them as soon as a payment is missed. Pearson offers very tight payment terms, only 14 days, but often isn’t paid until 30 days’ time. “If we had payment terms of 30 days, they’d stretch it out to 60,” she warned. To keep her relationships with her clients sweet, Pearson aims to establish a system where she makes the deal with one person and chases payment from another. She explained: “[If you] delve down into the bowels of the accounting department, then hopefully you can do sort of good-cop bad-cop to get yourself paid on time.” Depending on your business model, it might be advisable to hold off on delivery of your service until you have received payment, or to ask for 50 per cent up front. Maiden Voyage charges up front for a new listing on its website, but at the end of the agreement if the hotel wants to re-list it would be more expensive for Pearson to take its post down and wait for payment than to chase the renewal. If a business has ongoing contracts with clients, one solution to this problem could be to automate payment collection via direct debit. GoCardless offers such a service for small businesses and startups – clients receive a notification three working days before payment is automatically collected on the due date, cutting out the need for small businesses to chase payments. A temporary solution for small businesses struggling with cashflow problems as a result of late payments may be to borrow money from elsewhere. Almost half of UK SMEs are “permanent non-borrowers” and have not sought outside funding in the last five years – yet for businesses struggling with cash flow this may seem counter-intuitive. There are plenty of debt solutions available to SMEs and if handled correctly they can be a flexible source of funding when in need. Overall, there are solutions out there for small businesses if you’re willing to do your research – keep your options open and don’t just wait it out and let your cash flow suffer when you have a late payment due. Keep your relationships with your clients friendly and polite – but don’t be cowed by them. If it’s money you have earned, you have a right to insist on payment.Share this story