Waiting for invoices to be paid can make doing business very challenging, particularly for small businesses, the self-employed and freelancers who may already be struggling with cash flow thanks to the pandemic.
The Forum of Private Business indicates that a quarter of businesses fall into insolvency as a result of late payment of invoices, so what can business owners do to ensure they get paid on time?
Here, FBC Manby Bowdler’s Debt Recovery Manager, Emma Northall looks at five ways to manage debt recovery and payment procedures to boost your business’s bank balance:
Clear payment terms
Make sure your clients know from the outset when they will be expected to pay you. Outline the terms of the work you are doing for them, when the work will be completed, the cost and when you will be raising an invoice for the work to be paid. Once you have established a clear process, include these payment terms as part of your terms of work.
A clearly drafted document like this can help avoid disputes and delayed payments in the future.
Invoice on time
Sending your invoice on time demonstrates that getting paid is important to you. It also provides the person or business you are invoicing with certainty about when they should expect to receive it. Late invoices are not a welcome surprise for anyone! So, be prompt and clear when raising your invoice and ensure your invoicing actions match your business terms.
After you have sent your invoice, set yourself a reminder for when its due for payment and check whether it has been paid. If your invoice hasn’t been paid by the date you stated, send a reminder by email or letter. Following up on your invoices sends a clear message to the client that you take payment terms seriously.
Establish a process for late payments
No matter how diligent you are with your terms of business and chasing invoices, you may still encounter late payments during the course of running your business, so it’s wise to establish a clear process for dealing with these clients.
You could start the process with a simple phone call to establish why a payment is late and when you could expect to be paid. Once you have established your late payments approach, explain to the client that you have a standard escalation process, which may include charging interest.
Getting legal advice
If your calls and letters aren’t enough to get the debtor to pay you what you are owed, it may be necessary to enlist the assistance of a debt recovery lawyer to manage the debt recovery process for you. The solicitor will initially send a letter indicating they have taken over managing the debt - in many cases, this is enough to prompt the debtor into paying.
Small business owners, the self-employed and freelancers rely on being paid promptly to pay their own suppliers, staff and bills, so unpaid debts can quickly have a serious knock-on effect. For freelancers and the self-employed especially, invoices are direct income, so going unpaid can mean getting into personal financial difficulty too.
With so much at stake, can you afford to wait to get your payment and debt recovery terms up to scratch?
For further advice on matters relating to Debt Recovery you can speak with Emma directly.