Unpaid bills are costing sole traders a massive £8.1bn a year according to mobile payments service Paym. Research has revealed that giving up on chasing late payments is causing sole traders to lose out on an average of £2,472 a year.
The findings point towards a steep increase in the trend for late payments of 30 per cent this year compared to 23 per cent in 2015. That’s a total of 231,000 more businesses affected.
So how can you avoid missing out?
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 want to get paid on time. Have terms and conditions to hand as well as how late payments will be dealt with.
This may seem like an awkward conversation at the time, particularly if you know your client outside of the job, but it will save confrontation further down the line.
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. Always keep a record for yourself in case invoices go missing.
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.
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.
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.
Take legal advice
If at any point you are unsure of the process, then take legal advice. Many specialist solicitors offer fixed fee guidance.