So for 2018, make one of your resolutions to cut down on late payments. ‘but how?’ you might ask – after all you can’t force your customers to pay on time. But you can put systems in place to prevent late payments before they become overdue. So to start 2018 off right, here are 4 ways we recommend to help you reduce customer late payments.
Identify Problem Customers
The year is drawing to a close, so now is the perfect time to look back on the last 12 months and see exactly how many late payments you had, and who was responsible. With most businesses, we tend to see the same culprits time and time again. The serial late payers, the ‘always has an excuse’. But in 2018, we’d like you to take a good, hard look at those customers and really consider if they are worth working with again. Is the amount of energy and money you spend chasing those late payments worth the value they are bringing to your business? Or would you be better off saying goodbye, and focussing on your existing clients and gaining new ones? If they are worth the hassle, think about what steps you could put in place to ensure they don’t repeat this late paying behaviour in 2018?
Set Up Direct Debits
You would be amazed by the sheer number of people who, despite needing to pay for the same thing every single month, forget to actually process the payment. Recurring payments are a fairly high source of late payments for businesses across the country – but they don’t need to be. If you are selling products on a subscription, or you have a recurring monthly service, it’s wise to get your customers onto a direct debit plan. There are a few ways to do this – either through basic direct debit instructions or by using a service such as Go Cardless to manage them for you. By switching to a direct debt scheme, you never need to worry about late payments for recurring invoices again. Even if the client forgets about it, the money will still be automatically transferred into your account. In fact, many service based businesses have reported that their late payments dropped substantially after this one simple change.
Review Your Terms & Conditions
Terms and conditions are the binding contract of any business. They are your legal fail safe – the net you can rely on to catch you if things start to go wrong. For many businesses, the terms and conditions don’t need to be used that often. This in itself isn’t an issue, but it can cause problems if they aren’t kept up to date. As we move into a new year, take a few minutes to review your terms and conditions. Does it all still make sense? Does it align with your business? And have you been adhering to your own terms? For example, many businesses have a clause about late payment interest charges, but very few actually follow through and use it. If you’re staring guiltily at the floor right now, why not make your New Years resolution to implement late payment charges? And if you don’t have a policy for it, make one.
Run Credit Checks
If your business centres around large purchases, or the giving of products on credit, then it’s always a good idea to choose your customers carefully. Rather than accepting anyone, make sure you are running credit checks on the businesses you are lending to. Because after all, you are lending, often in an unsecured manner. At Debtcol, we provide both outsourced credit services and financial health checks for prospective clients, so you can be sure that they have the resources to pay you on time before you part with any products or services. It’s a small change, but it can save you a lot of money in retrieval fees.
Late payments are one of the most common issues for business owners across the country, and yet many don’t have basic systems in place to prevent them. If you’ve been struggling with late payments over the last 12 months, then it’s time to make a real change. If you’re not sure how to do that, we’re here to help. Just get in touch with one of our advisors, and we can help you put the policies you need in place to protect your business from late payments in 2018.