Chasing late payments has to be one of the most challenging tasks you’ll be faced with when running a business. Unpaid invoices can have a negative effect on cash flow (and potentially create an awkward relationship with the late-paying clients), and this is particularly relevant in the case of small businesses. Here is some advice on how to deal with these situations.
Set your terms of business right from the start
One of the golden rules of business is that the customer must be in no doubt about your payment terms. This has to be clear right from the start. The customer must be aware of the cost, when they need to pay it, and whether there are any penalties for late payments. All this must be clearly displayed on the invoice. You may want to consider offering a discount for early payment.
Keep your focus
In business, asking for what has been agreed upon is part of the process. It is fundamental to any business relationship that the process is professional, efficient, and structured according to clearly-defined rules that everyone must follow. This means that in the case of an overdue invoice you have to take the initiative and ask for the money, rather than tip-toeing around it or being vague about it. Politeness is your best friend.
Make payment as easy as possible
Paying bills can be time consuming. It is in your interest to facilitate this process by adopting means of payment that make this task easy and straightforward. Include all acceptable options on the invoice. Online payment is the most immediate and cost effective means of payment.
Send out invoices promptly
Make sure you invoice promptly as this will help ensure you’re paid on time. A standard invoice should include the following items:
- Company name, logo, registered address and company number (if applicable)
- Your terms and conditions
- The invoice date and number
- Details of the service or product
- Any reference or order number
- The amount due
- The customer’s name and address
- Your payment details
- If relevant, how much VAT has been charged, your VAT registration number and a VAT breakdown for each item on the invoice.
And of course, make sure that this information is accurate – any mistakes could mean the invoice is sent back and payment is delayed.