Making Late Payments a Thing of the Past
All is not lost, however, as I have a few tips to help you reduce the amount of time spent on chasing payment.
1. Make it easy to pay you
If you use accounting software, particularly the newer cloud software, it often has the capability to include a link in your invoice to enable your customers to pay direct from the invoice. This gives your customers an easy way of paying as soon as they receive your invoice. For regular payments, particularly if you have clients on retainers, you could also enable clients to set up Direct Debit payments, my favourite system for this is GoCardless but others are available.
2. Modernise your payment terms
You don’t have to stick to the traditional 30 days, nor do you have to have the same terms for every client. Credit is based on trust, which has to be earned, so why not start new clients on 7 or 14 days terms? You could also consider requesting partial or full payment up front before any work is handed over.
3. Invoice promptly
Don’t think that you need to wait until the end of the month, invoice as soon as the work has been completed. The earlier you invoice the earlier you can get paid! If you don’t have time to keep on top of regular invoicing, why not consider outsourcing this?
4. Be clear and accurate
It may seem obvious, but your invoices should be accurate and contain clear information regarding what is being charged and when payment is due. Don’t forget to include your bank details - you’d be surprised how many invoices I’ve seen that don’t include these vital numbers!
5. Keep communicating
Sending the invoice is only the first step in being paid, it’s important that you follow up with clients. If you have 14 day payment terms, why not call or email after 7 days as a friendly reminder that the invoice is shortly due, this also serves as a check that they’ve received your invoice and are happy with its contents. This step can also be automated to save some time.
6. Use late fees
Did you know that you have the right to charge interest of 8%, in addition to the Bank of England base rate, if payment is not received within 30 days (or earlier if a different payment window is agreed)? If you state that you will charge late fees, don’t be afraid to do so. On the flip side of this, you could also offer an early settlement discount so that early payers pay less.
One size does not fit all, and you’ll probably find that some clients need a completely different approach to others. Don’t be afraid of taking steps to ensure that you’re paid on time.
If you’d like to discuss how a bookkeeper can help you get on top of late payments, get in touch and start taking back control.