Top 6 tips for small businesses with late payments from clients.
- Submit your terms: The first important thing you can do to make sure clients don’t have excuses for late payments is to state the terms and conditions of the payment clearly on your initial invoice. State to the client when you expect to be paid in advance. It is surprising how very few small businesses remember this important must!
- Charge interest on late payments: All companies have a legal right to start charging interest on any late payments. Although many small businesses won’t like to do this in case they lose the work, what harm can be done in mentioning that late payment interest may be added on the invoice to remind the client about it. It might even encourage clients to before the due date.
- Get tough: Most small businesses often fail with the lack of financial stock and skill that would ensure they are paid on time, therefore anything you can do to increase you weight of cash will help your case. Some small businesses even put a stickers on all their invoices saying ‘we use a debt collection agency for overdue payments’. Clients will not want the hasle of a debt collection agency knowing about their late payments as it could in fact harm their credit references, so including stickers on your invoices could help you get paid more quickly. Very Simple, but very effective.
- Building up relationships: Many reasons are the cause to late payments but one of the main problems with late payment is that it’s often anonymous: accounts departments may not know you and can’t put a name to a face. Single out someone who can help you and introduce yourself and try to speak to the same person each time and create a good relationship. Once you have built up a good friendly working relationship, it will be much harder for them to let you down or not send out payment.
- Don’t focus work on one company: Relying for revenue on one big company or client for most of your profits is a BIG recipe for disaster, this can cause huge head aches if they are late payers. Avoiding this is simple, try and get a mix bag of clients who are both small and large companies, this will spread your risk. It’s just not worth the gamble on one big client, no matter how big and well respected they are companies go bust.
- Call it a day while you’re ahead: The important question to ask yourself when dealing a company that’s a late payer is: ‘Am I still making money out of this client’?’ If the deals you are doing with this company not leaving much profit margin anyway, and your waiting for the payment is it causing you to incur debts, then you could be making a loss out of the deal. Do your sums, do the add up in your favour? Make sure you know when it’s time to cut away.