We all work to get paid on time; I think we can agree on that. Unfortunately, it is not what many businesses experience. We can all think of times when we have worked so hard to complete that big project, then sent the invoice, only to wait weeks, if not months, to get paid! Think about the emotional drain you go through after putting your business resources, knowledge and hours of time to deliver a project, only to discover you have not been paid on time.

Late payment is a common problem faced by small businesses in the UK. Currently there are £55bn in unpaid or outstanding invoices in the UK, which is an average of “£12,000” per business. Furthermore, 41% of B2B invoices miss the payment due date.

Any unpaid due amount has an impact on business. Cash flow is really important and many small business owners believe it is the most important metric for your business. A sole trader and small businesses will say that if they are not paid on time by a client, it leads to financial difficulties because the cash flow is essential for the business to survive.

 

Infographic highlighting cost and challenges of late payment

 

The easiest and obvious way to maintain cash in your business is to get paid. Not only that, you need to get paid on time! If only if it was that simple right? There are number of ways you can improve chances of getting paid on time.

Professional invoice with company logo and clear instructions

Make sure you send the invoice with your business logo. You’re good at what you do. And you work hard to succeed. A shoddy invoice can, in a few seconds, undo all that previous hard work. Your company image will be seriously compromised if the invoice arrives on your customer’s desk with no logo. A logo subtly promotes your brand to many people who will handle that invoice, as well as act as a visual reminder to clients that they need to pay you!

A study conducted by QuickBooks showed invoices with logos increase your chances of getting paid on time by 300%. It should be incentive alone to get a logo designed for your business if you do not have one now.

E-Invoice with due date

Sending a paper invoice takes 2 to 3 days to reach the customer. You can create an e-invoice and send it the customer immediately. The benefits of e-invoices are it can be accessed any time by a business.

Make sure you include a “payment due date” which also increases your chances of getting paid on time. It gives the client a sense of urgency on the payment. You can use online invoicing softwares to generate e-invoices. Many of these softwares have a “late reminder” feature which sends a payment reminder to customer, once the due date is passed and payment had not been made. Don’t be complacent when it comes to chasing up payments as it shows you are not in a rush for payments.

Discount for early payment

Offer your customers incentive to make a payment before due date. It could motivate the customer to make a payment, which in turn can you help you with maintaining cash flow.

Offer quick and easy payment options 

Whilst it is good to offer customers various methods to make payments, try and promote online payments using PayPal and Stripe (as well as postal cheques and online banking) as this allows for a quick and easy transaction.

Late payment Commercial Debt Act

You should always try to make clients pay without getting into confrontation. There will be times when you have exhausted all options, yet the payment has still not been made. A firm action is needed at this point. You have protection for your payment in line with your contract, provided under the Late Payment of Commercial Debt Act. You can charge recovery fee on top of the due amount. For an invoice amount of up to £1000 you can charge £40 recovery penalty fee for late payment. But let’s hope you never have to get to this point!

Subscribe to our blog


Loading