Poor cashflow is one of the biggest threats to a business in this sort of economic environment. This article gives a few tips on what to do about late payments.
Look closely at your customers.
If you are dealing with another business, you might want to run a credit check on them.
This is fairly standard practice these days and there is nothing underhand about it.
Quick credit checks are quite easy to run online.
Of course, most wet leisure businesses will be dealing with private individuals and so a credit check isn’t possible. But you can use your common sense and possibly even ask around your network.
New customers and existing customers might be experiencing financial difficulties and it just makes sense to be aware of this and act accordingly.
Make your payment terms clear.
Ensure that your payment terms are clearly shown on every invoice that you send out.
Keep your terms consistent and make sure that new customers are aware of them.
If there are costs associated with late payment, make sure that customers are very clear about those as well.
Try and avoid cheques as a method of payment.
Of course, cash is still king but there are advantages to electronic transfers and card transactions – the biggest one being that you won’t hear anyone say, ‘Your cheque is in the post’.
Chase late payments in the right way.
If you are owed money and have been waiting on a payment for a long time, it’s easy to work yourself up into a state before making that call or writing that letter.
So if your terms are 30 days, then get in touch soon after that with a firm but polite reminder.
‘Asking’ for money isn’t always easy, particularly when it is already owed to you but do it in a way that won’t impede future sales.
Make an early courtesy call.
If you have invoiced a customer for a large amount, then call them up before the bill is due to make sure that they are happy with the work or the installation and that there is no problem that might hinder timely payment.
It’s good customer service but it also makes it more likely that your bill will be paid on time.
Don’t put off chasing unpaid bills.
It isn’t a pleasant task and it isn’t something that any of us want to be doing, but it does need to be done.
The longer you leave it, the bigger the problem becomes.
You have a statutory right to claim interest on late payments at 8% over the Bank of England base rate.
You can also claim compensation for debt-recovery services.
These sorts of things should be an option of last resort, but they are available to you by law.
Sometimes being flexible is the best way.
If you have a large outstanding debt then offering some sort of flexible payment terms may be your best chance of recovering the money.
You might offer to split the bill into smaller sections that payment can be managed on or you might look at reclaiming the money by regular instalment.
In either case, it’s better to get some of the debt recovered than none at all.
The last resort.
Using a debt collection agency must be the absolute last resort.
Debt recovery agencies will often work on a no-win, no-fee basis but their commission can be substantial and, sadly, it isn’t the sort of thing that will enhance the image of your business.
Avoiding bad debts is much more desirable than trying to collect them, but if and when that has to be done; flexible, polite and timely action will have the best results.