Late payments cost businesses.
Aside from being a source of frustration, missing or delayed payments can seriously threaten cash flow. Latest estimates suggest that nearly half of SMEs are running at a shortfall of just over £30,000. On top of that, it is estimated that four working hours a week are lost to chasing payments.
To help you dodge this double punch of lost revenue and lost productivity, we have compiled the following short guide to managing late payments. Read our tips and best practices on how to get your customers to actually pay you – on time.
Avoiding Late Payments – A Short Guide
1. Set Up Expectations
The adage “prevention is better than cure” rings true, especially when it comes to late payments.
Be clear from the start what your payment terms are. This means you should explicitly outline what needs to be paid, when and whether there will be any penalties for late payments. Display this information on your invoices then there can be no confusion what your expectations are. After all, if someone is unsure when they should pay, they are unlikely to pay on time.
2. Be Prompt & Don’t be Afraid to Follow Up
Just as you set out your expectations for your customers, make sure that you invoice promptly and follow up any delays in payment quickly.
Communication really is key to help avoid customers paying late. Invest in email automation software to send out regular reminders, streamline your direct mail process or take a more hands on approach by calling your customers when payment is due. Whichever method or combination of methods you choose, keeping those lines of communication open is what matters.
Some customers may have a genuine reason for not paying on time so it’s important that you speak to them as soon as possible to create that open dialogue and work on a solution. In these circumstances, making a small adjustment to the terms such as moving the payment date or creating an instalment plan can make all the difference.
3. Take Away Hurdles
It may seem simple, but make it as easy as possible for people to pay you. Complicated portal logins, long waits on telephone lines or having to remember to write and then post a cheque create barriers to payment. Your customers are busy too and paying an invoice may not always be their top priority.
At the very least, ensure that your invoices and any reminders are addressed to the right person.
Tackle Late Payments with Direct Debit
Direct Debit can help to eliminate your late payment problems by automating the entire payment collection process. Get paid on time, every time when you instruct an established Direct Debit service provider, such as the team here at FastPay.
Our dedicated Direct Debit advisors have helped businesses across the UK to save time, save money and streamline their cash flow. IP Phone solutions were able to improve their business by 300% since making the switch to Direct Debit.
Find out how we can help you by getting in touch today.
Call 0161 737 5290 to speak with one of our friendly team members.
Alternatively, you can request more information on our Direct Debit solutions by completing our easy contact form.