As a micro business owner, managing cash flow is one of the biggest challenges you will face. According to payments processing company, Bacs, the UK’s small and medium-sized firms (SMEs) are currently owed £26 billion in overdue payments. The cost to sole traders alone was a massive £8.1bn in 2016, research by mobile payments service Paym has shown.
So how can you avoid missing out? Here are some tips…
#1 Make your expectations clear
You may be working alone but you are a business and need to run as such so make sure your customers know that you expect to get paid on time. Have terms and conditions to hand as well as how late payments will be dealt with.
#2 Create some professional distance
Requesting payment may seem like an awkward conversation, particularly if you know your client outside of the job. Consider setting up a separate accounts email or hiring a freelance administrator to chase invoices over the phone for you.
#3 Be prepared to seize the moment
If you deal face-to-face with customers, then consider whether you might be able to be paid immediately using mobile payment. This could make life easier for them and you.
#4 Make sure your invoice is received
It’s crucial to ensure that invoices have arrived safely and are on your customers’ ledgers. Follow paper copies of your invoice up with an e mail to your contact and to the accounts payable department at the same time.
#5 Always keep a record
Invoices can go missing so it’s wise to keep copies along with a record of when they’ve been sent out.
#6 Communicate clearly
Let clients know how much you value their custom and appreciate them paying you on time. Always thank them for payment promptly.
#7 Offer a reward
Show customers your genuine appreciation and incentivise them to pay on time by offering them a small discount for early payment or voucher to use in the future. This could help speed up the process!
#8 Send a ‘Late Payment Demand’
Your customer should have already been made aware of your expectations and terms and conditions so, in the event of non-payment by the deadline date, you should issue a “Late Payment Demand” (LPD). This is sent by a solicitor and will include the late payment compensation and costs of interest on the debt.
#9 Issue a Letter Before Action
This is the last resort before taking a claim to court. It gives clients one last chance to settle the debt and should include compensation and interest to be claimed as well as a date to indicate when the debt needs to be paid.
#10 Contact the debtor
Speak to them before you make a claim to remind them of the escalating costs that will result from court action. If you still need to make a claim then ensure it includes all costs, compensation and interest that you are entitled to.
#11 Take legal advice
If at any point you are unsure of the process, then take legal advice. Many specialist solicitors offer fixed fee guidance.
#12 Learn from experience
Hindsight is a wonderful thing! If you have customers that persistently pay late causing you stress and additional admin then it may be best to end the relationship as a last resort. Be sure to end things professionally and amicably.