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Dealing With Late Payments
Dealing with late payments 758 513 Stepping Stones Accountancy

Dealing with late payments

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 You can also book a free 30-minute call with Yarka –

How To Manage Late Payments | Accountancy Support for Late Payments | Help with Late Payments
How to manage late payments 758 513 Stepping Stones Accountancy

How to manage late payments

Cashflow is king for any small business and having to manage late payments can be incredibly difficult. If debt builds up, then it becomes tricky to manage your own bills causing issues with paying suppliers and employees. When faced with the difficulties surrounding debt recovery there are 5 key steps that can be taken:

Step 1 – Adopt a reliable process when late payment occurs and ensure a clear line of communication is deployed. If payment does not arrive during the agreed terms, ensure a reminder is promptly sent. The reminder can be in the form of a telephone call, e-mail or re-sending of the invoice. Make sure that any contract clearly displays your payment terms and includes a caveat that if payment is late then penalty charges in the form of interest will apply. Finally, if payment continues to remain unpaid then cease any future work until the debt is paid.

Step 2 – Government legislation states that in certain cases you can start to charge interest on outstanding debt. Make sure that this is included in any Terms & Conditions of Sale. The rate can be up to 8% of the Bank of England base rate.

Step 3 – Send a letter before action. As the name implies this is the sending of a formal communication via the post or via e-mail. It will advise the client that if outstanding payment is not received within a specific date, then legal action will be taken.

Step 4 – Send out a late payment demand. When worded correctly a formal communication is sent which quotes the Late Payment of Commercial Debts (Interest) Act 1998 stating that the company owes the cost of the original invoice plus interest costs.

Step 5 – Make sure that all data is accurate and don’t take longer than 6 years to reclaim the debt. Ensure every formal document is 100% accurate, for example if the business owing money changes address, then make sure it is accurately documented. Companies will try to put all sorts of barriers in place as a delay tactic to avoid making payment. Be aware that if the time period reaches in excess of 6 years, then it will be classed as statute-barred, meaning as a business you will have to write it off as bad debt.

If you have any questions or need some help in regard to managing late payments then our team would be happy to help. Please call us on 01173 700 079 or e-mail You can also book a free 30-minute call with Yarka –


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