Whilst it is your right to collect deserved payments for your services, we can understand your frustrations. You want to remain cordial with your clients, so demanding payments goes against the grain.
But consider this crazy statistic for a second. 62% of SME invoices were paid late in 2017…
Late payments cost one quarter of UK businesses ten hours a week. In other words, one-quarter of forty-hour week is being used to chase customers. Hours that could be deployed much more usefully and at a lesser expense.
If you’re one of many organisations that’s rightly sick of chasing payments, here are some tips on how you can manage this sticky situation without destroying the relationship you’ve worked hard build.
Avoiding late payments early-on
Sure, new business is exciting. But you don’t want to create a rod for your own back. Prevention is better than cure, as the old saying goes. The trick is to remove any potential hiccups early in the game.
- Credit check all new clients – this should give you a pretty good estimate of the organisation you’re doing business with.
- Ask new customers to pay a percentage up front – if they’re going to be difficult, at least you’ve already been handed a good portion of the money.
- Ensure that you know exactly who to send the invoices to – most companies will have at least two designated persons who can sign-off invoices so start getting CC happy with those emails.
Make sure the issue doesn’t lie with you
Believe it or not, invoices are commonly unpaid because the purchase information or bank details simply aren’t on the invoice. Sorry but it’s true.
Navigating the excuses (and there will be many)
Every phone call will come with an inevitable excuse. Luckily, most of these are so predictable they might as well be scripted. So we’ve done just that:
- “We haven’t received your invoice” – the answer to this is to ask the customer to send a hard copy and an email. You can even put a read receipt on the email. Watch them try to get out of that one…
- “We’ve paid/are in the process of paying” – “that’s great. Please can you send proof of posting or remittance advice?”
- “The only person who can authorise this is on annual leave” – this relates back to our earlier statement about two designated persons who can authorise payments. After all, who’s going to authorise the urgent one the only person who can is away?
- “Can I get such and such to ring back?” – start notetaking. Keep a record of who you’ve spoken to and when. Not only does this give you more ammo as time goes on, it will also come in handy if the only possible outcome is legal action.
- “We’re waiting for a customer to pay so we can pay you” – this is one of those challenging business scenarios that make everyone’s lives difficult. In this instance, see how much they can pay at that time and work the rest off in instalments.
- “I’m not happy with the service you’ve provided” – put a time-barring clause in your terms and conditions stating that complaints about work must be made within a certain time-limit.
Migrate to Direct Debit
Direct debits give you, the company, control over payments. We’re not saying late payments are a thing of the past when you switch, but you’ll certainly find them sucking less time out of your day.
Payments come direct from a customer’s account. Unlike cards, which can get damaged or expire, the only way that a payment can’t be made is when an account is empty. As a result, late payments are reduced dramatically.
Get someone else to do the hard graft for you
Using a third-party debt collection company or bureau takes the onus off your organisation. It prevents your employees having to handle potentially challenging conversations, so that you can deal with only the good aspects of your partnership.
Bureaus specialise in everything from credit control to cashflow management. They can improve collection rates and save your staff from ever having to chase a late payment again.
Finally remember: Some people are just badly organised. So don’t despair. Cashflow is the backbone of your organisation and customers do understand this. Most of the time, they’ll pay up eventually.
DFC is a leading Direct Debit bureau offering a transparent service, with clear pricing and no hidden extras.
DFC’s mission is to make our clients business easier and help improve your relationships with your customers so that they stay longer. You can let DFC collect your Direct Debits, while you concentrate on running and growing your business. Find out more: https://www.debitfinance.co.uk/solutions