Log InResults from several studies completed highlight problems caused by late payments, with research suggesting that around 76% of all UK businesses are paid late. It is estimated that SMEs across the country are now chasing more than £50bn worth of late payments.
Outstanding debt due to late payment can easily place businesses into financial difficulties, with the Federation of Small Businesses stating in 2016 that 50,000 small businesses each year are forced to close down by this behaviour.
This guide can assist you with preventing bad debts accruing and minimise the disruption when they do.
Keep Late Payments to a Minimum
It’s not always possible or realistic to completely avoid late payments, but there are steps you can take to minimise it.
- Keep your credit control procedure clear.
- Once a payment becomes late, send a seven-day demand for payment.
- Follow this demand with a phone call, to help remedy any disputes or problems.
- As soon as this period has ended, you should consider passing the debt over for debt collection.
- Obtain as much information about your customer as possible from the start.
- Who are you working with or for? Sometimes, just having the name of the company or consumer is not enough.
- Credit check your customers where possible.
- Ensure your terms and conditions are clear.
- Ensure your payment terms are clearly laid out on your invoices and in your terms and conditions.
- Keep a signed order form or agreement on record.
Maintain healthy relationships with your customers
Dealing with late payments can be a tricky conversation to have while attempting to keep a good relationship with your clients.
Inform debtor that the decision to take further recovery action regarding the debt is not personal and is out of your hands. Often, there are occasions where it is a requirement of insurance that further action is taken to recover unpaid invoices after 30 days.
In many cases, this shouldn’t damage your business relationship, however if the late payments continue to pile up you may want to consider whether you actually want them as a customer/client.
Debt collection for SMEs
Recovering your business debt is a priority for us, as we understand how important prompt payments are to the success of your business. On receiving instructions we will take immediate action to facilitate the early collection of your debt, which will include:
- Companies House or Insolvency search will be conducted to highlight any issues from the start
- A letter prior to action will be sent, notifying the debtor of the set number of days to make payment
- We will communicate with the debtor and chase where necessary.
Opting for a debt recovery service allows you to have expertise and experience on your side. Typically using a debt collection service means your chances of recovering the debt owed are greatly improved, as debtors will often take the claim much more seriously.
Passing your unpaid invoices over to a debt recovery service can give you peace of mind the debtor is being chased for payment while you continue to focus on your day-to-day.