Late payment is crippling small business. With the average small business owner waiting 56 days for payment – it’s a huge burden for small business. Try these practical tips to help ease the cash flow squeeze.
Recent research by Scottish Pacific found that on average small business owners have almost a third of their revenue tied up in outstanding invoices. It’s no wonder late payments are a source of frustration. Getting your clients to pay on time can be a struggle, but it doesn’t have to be that way. Being proactive and adopting a few simple strategies could help your small business get over those late payment blues.
Provide clear payment terms
It pays to be clear about your payment terms from the get-go. If you are onboarding, new clients make sure to outline your payment terms from the very first meeting. By providing this information upfront, you are setting the guideline for when and how you expect payment. If it’s a big job with multiple charges, provide your customers with a payment schedule, so they know when they need to pay you. Don’t be afraid to send reminders of when a payment is due to help your customers stay on track.
Make it easy for your customers to pay you.
Make sure your invoices are going to the right person. When you are setting up a new account, confirm who you need to attention bills to and who will have the responsibility for authorising payments. The more barriers you can remove from the payment process, the higher the likelihood of prompt payment. So assist your clients by making it easy for them to pay you by providing a range of payment options where possible. Set up e-invoicing to make transferring funds simple. Or secure upfront payments for large jobs.
Follow up late payments promptly.
Even the best of us get busy sometimes and overlook a bill. If you find a client has missed a payment, get into the habit of following up promptly with a call or email. Most people won’t mind a gentle nudge, especially if the delayed payment has been an error on their part. It also gives you an early opportunity to speak with the client should they be facing payment difficulties, before the situation gets out of hand.
With harsh trading conditions continuing for the foreseeable future, Peter Langham, Director at Scottish Pacific told SBF many businesses are expecting an increase in late-paying customers, and others are concerned that they will not be able to afford to update essential equipment.
He suggests businesses look to alternative finance options to help smooth cash flow bumps.
“Our customers are realising the growth potential in their businesses by unlocking the cash tied up in invoices or business assets, with invoice funding proving itself as a style of funding that grows in line with the business and adapts to changing needs, without risking the family home,” he said.
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