For SMEs, their customers are their bloodstreams and when they take too long to pay it can cause unfortunate dilemmas for the business.
Late payments are tolerated, but when they exceed longer than 7-days it starts to become an issue, an issue that SMEs cannot afford to take on. Your customers are supposed to be loyal, so not only will this affect your trading it can also affect the partnership you currently have which can also ultimately cause strain on your business.
So, without sacrificing so much of your time, which also costs more as you’re wasting valuable time chasing customers rather than your day-to-day job what can you do to prevent it from happening?
Before contracts are signed and agreements have been made it is important for you to lay out the ground rules, especially when it comes to billing at the end of the month. These ‘ground rules’ will be called policies and payment dates and it should be crystal clear that these must be stuck to otherwise there will be a late fee.
What should your policy include?
- The work agreed between both clients
- The cycle of payments
- Agreed billing date
It is also important to include a note that if any partner decides to terminate the relationship then they must still pay until their notice period has ended.
Keep things sweet
You might be ‘worlds apart’ but it is always important that you maintain your relationships and keep them mature and ‘fluffy’ – if you find yourself slacking in this region then it is worthwhile employing someone to look after partnerships full-time (of course, depending on how many customers you have).
What should you do?
- Keep in touch, ask how they are from time-to-time
- Ask how the business is doing, act interested not nosey
- Always stay polite – even when things become frustrating
Add it to both calendars
We are only human, so things will slip from our minds now and again and this doesn’t mean that you’re incompetent, it is only natural. However, when it comes to sending invoices and hoping to receive payments ASAP then this is something you should avoid forgetting!
To prevent this from happening you should both agree a set day to bill on each month – for example the 10th working day once this is confirmed add it to each diary so there is no room for forgetting and if they do then you have reason to have a chip on your shoulder!
Finally make sure all is correct
When invoicing, it is very important to ensure the figures you are sending out are correct to avoid delays and damaging reputations within the industry – remember it’s common for businesses in the same sector to talk and discuss partners and if every month your numbers are not what they should be or agreed then you are running the risk of losing current and potential partners.
If you are finding that your customers are taking too long to pay and your business is struggling without the cash flow, then why not compare invoice finance with over 30 leading lenders?