As a business owner cashflow is king and one of the biggest barriers faced is debt through late payments. Unfortunately, there are many reasons why customers delay making payment. Sometimes it through no fault of their own and for others that is just how they like to do things. Unfortunately for the company being owed the debt it can be very distressing.
Of course, late payment does not just affect the business owner, it can affect employees and the businesses supply chain. If money owed is substantial then trying to pay monthly bills such as salaries, rent or utilities can be incredibly challenging.
Staying on top of late payment is crucial, here are a few tips on how to deal with this:
- Try to keep a healthy level of cashflow in the business. If you can keep a safety net it will help when customers take their time to pay.
- If cashflow is an issue, look to take advantage of business finance, get a boost in funds, you can even explore the benefits of invoice finance which allows immediate payment once an invoice is raised.
- Have accurate terms and conditions and be vigilant with them. When you sign-up a new customer, make sure that they have received a copy, fully understand them and agree to comply with them.
- Either request a deposit before any work is started or if possible, ask for 100% payment upfront.
- Fully understand your customers. Complete good due diligence and recognise that if a customer has poor credit rating or reviews then ensure you request full payment upfront. If you come across any red flags make sure you are 100% happy payment will be received, if not walk away from the project.
If things do go wrong, there are also some steps you should follow for best practice:
- Keep good positive lines of communication, never be derogatory towards the company and document every single form of contact, if it is a phone call try and record the conversation.
- If you must take action, seek the help of a reliable debt collection agency, ask for recommendations as it can be a challenge to find the right company to support you.
- Finally, if all else fails seek legal advice and consider taking the matter to a small claims court.
In conclusion at some time or another a business will be faced with chasing outstanding debt. The key thing is to trust your feelings and do what is right for you and your business.
If you have questions or need some accountancy help, please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free 30-minute call with Yarka – https://calendly.com/yarka-ssa/20min
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