|
Top Five Tips for Reducing Late Payments
 As
someone with an interest in a small
business, you will know how important it is
to be paid on time by your business
customers, and keep your cashflow running.
Yet a shocking number of small businesses
are continuously suffering from late
payments, putting their cashflow and even
their business at stake.
A new survey by BizHelp24 has found that an
astonishing 64.6% of small businesses suffer
from late payment every month. 42.9% of
businesses are paid late more
than once a month, with 21.7% being paid
late once a month.
If your business falls into these
categories, then you are seriously risking
your stability and operation. Late and non
payment are among the biggest causes of
business failure in the UK. By damaging your
cashflow, late payment makes it harder for
you to pay your customers and other costs;
which could then also damage your
reputation.
The good news is that it is
possible to vastly reduce the amount of late
payments your business suffers; 4% of
businesses only had late payments every 6
months, 3.3% only had late payments once a
year, 8.7% had less than one late payment a
year, and 13.7% never have late payments.
Here are our five top tips for reducing late
payments from businesses:
1. Spend some time improving your credit
policy and credit management skills. A
Credit Policy should outline your company's
strategic and operational requirements from
credit sales. It is not sufficient
to provide credit to your customers "because
everyone else gives credit". By working out
how much credit you can afford to give, you
can better enforce which customers get
credit. For Example: You will be able to see
those who always pay on time, and focus your
credit facilities on increasing their orders
instead of taking on new customers that
appear unreliable.
A key part of avoiding late payment is
knowing who to give credit to.
2. Take a little time to fully understand
the
Late Payment of Commercial Debts Act 1998.
Although it is not a legal requirement, add
to your contracts a statement that you
“Understand and will enforce your rights to
late payment interest and charges under the
Late Payment of Commercial Debts Act 1998”.
This will make sure that your customers are
aware that you will not tolerate late
payment.
3. Chase up late payments quickly. The
longer you wait to chase payment the less
likely you are to get paid at all. If your
customers know you are quick to deal with
late payments they will be less likely to
delay or ‘forget’ payment.
Why not see whether a debt collection
service could help you get paid?
4. Reduce credit facilities for businesses
that keep paying late. For example: If a
customer always pays late on a 90 day credit
facility, consider reducing that facility to
60 or 30 days. If the customer always pays
late a £2000 credit facility, consider
reducing that to £1500 or £1000. You should
remember that this may make some businesses
less keen to do business with you, but if
they are repeatedly paying late then it is
much less of a loss to you than a reliable
customer.
5. Check out your customers before
you offer them credit. A company report will
give you information that helps you decide
if a company is reliable and trustworthy.
The small cost is well worth it against the
costs of late payment.
Find out more about our great value Company
Reports Service here.
|
