At Debtcol we don’t just help you reclaim debts that won’t be paid – we help you put systems in place to make sure all your invoices get paid on time. So, this month, we’re going to talk about chronic late payers, and what you can do to manage them.
Set A Policy For Late Payments & Debts
Most businesses have a late payment policy in their terms and conditions. They come as standard for most. But a staggering percentage of businesses also won’t enforce that late payment policy. This means that even though they are entitled to charge interest on late payments, they don’t. The problem with that is it sends a bad message to the client and sets a precedent for them paying late .
Late payment policies are designed to be a deterrent. They set out what penalties the client will face if they don’t pay their invoices on time. The most common is a late payment fee. Legally, you can charge the standard statutory late payment fee – 8% plus the bank of England base rate – as soon as the invoice is overdue. You can choose to charge more than this if it’s written clearly in the terms and conditions your client agrees to. You can also choose to add further penalties – for example you can choose to suspend delivery of services or goods until the invoice is paid.
But these policies are useless if you don’t actually use them. If you just let your late paying clients get away without paying interest, then they will know they can continue to pay late and not suffer any ill consequences for it. The key to avoiding that is to set out a clear late payment policy, let your clients know it will be implemented if payment is late and enforce it religiously.
Keep in Regular Contact
Make sure you are in regular contact with late-paying clients. If their invoices are not overdue yet, but they have a history of paying late, then you could contact them before the invoice becomes due, in order to remind them when payment needs to be made. If they do owe you money, make a note in your diary to call them regularly to check in until that debt is paid. This will achieve 1 of 2 things. The first is that the person dealing with payments will get fed up of hearing from you and will pay your invoice quicker just to avoid the calls. The second thing it could do is uncover any underlying issues preventing your invoices from being paid on time. For example, if the business has just merged with another company, then the accounting processes might be up in the air for a little while. This can mean that invoices get sent to the wrong people, are mislabelled as paid, or just slip through the cracks and never get paid. By having that open dialogue, you can discover if there is something else going on and provide solutions that can help you get paid faster.
Technology nowadays is so advanced you can get an app to do pretty much anything. And that includes your invoicing. Where you can, we highly recommend automated invoicing within your business. It means you’ll never miss billing someone for the work you do, and it also means you’re more likely to get paid faster. This is particularly true if you choose a system that allows ‘one-click payment’. This sends your clients’ invoice to them automatically with a link they can click to pay using a stored card or even a PayPal account. This takes the drag out of the process and means you’re much more likely to receive your payment without delay. It’s a particularly good system for recurring clients, especially if you set up automated recurring billing. Really, any system that takes the workload out of paying your invoices will increase the speed you get paid.
And of course, it always pays to have a professional in your corner in case your late payer turns into a non-payer. At Debtcol, we work with businesses of all shapes and sizes to help them manage their cash flow and tackle late paying clients and bad debts. Our professional advisors can handle calls for you or give you advice on the best way to manage your payment process moving forward. If you would like to know more, please get in touch with the team today, and one of our advisors will be happy to help.