Every year, thousands of otherwise viable businesses get into difficulties because they run out of ready cash due to customers paying slowly. Try these top tips to help your business trump late payers!
1. Adopt a minimum fee – sometimes low cost jobs can be more trouble than they’re worth
2. Check clients’ credit. This needn’t be expensive or time consuming, but can help avoid costly ‘surprises’!
3. Secure a commissioning payment from all new clients as well as those with a poor payment history.
4. Agree staged payments on larger projects, timed to be paid before critical parts of the work are completed or released
5. Before starting any work, explain your terms and expectations clearly. Get the name and contact details of the person in charge of payments and find out what information they require on invoices and how long their payment procedures take. If their procedures take longer than your terms, agree in advance how this can be overcome
6. On completion of any work, obtain a signed declaration stating that the work has been completed satisfactorily and confirming payment will be made when due
7. Offer an early – 10 or 14 day – settlement discount. It should be big enough to be attractive to customers but not so big as to hurt your margins
8. Make sure you understand late payment legislation. A users’ guide is available from: http://www.payontime.co.uk/downloads/late_payment_brochure.pdf
9. If debtors offer to pay by instalments, insist upon a set post-dated cheques covering the entire amount
10. Have a clearly defined policy and set of procedures, follow them and if payment doesn’t arrive, take action immediately. Nothing encourages late payers more than an absence of consequences. Remember Diefenbaker’s Dictum: ‘Don’t get mad, get even!’
11. Remember that not all business is good business – occasionally it can be better if some customers get their unofficial overdraft from your competitors rather than you!
For more information on how to trump late payers, contact us on firstname.lastname@example.org.