Is late payment putting your business at risk? | SBCA

Is late payment putting your business at risk?

By 3rd October 2019Business Management
late payment putting your business at risk

One of the biggest challenges you face as a business owner is making sure that clients pay regularly and on time. It’s crucial that you know what, when and how your clients will pay to make sure things run smoothly and to manage your cash flow. If your cash flow breaks down, this could seriously risk the future of your business.

Don’t let late payment grow into a bigger issue

We know from speaking to our clients over the years that it can feel like you’re chasing your tail with invoicing, despite your best efforts. Late payment is frustrating, disheartening, and can taint an otherwise happy and productive client relationship. But there are some simple ways to stay on top of your invoices. Here are some easy solutions to help you get paid on time:

Get organised

And stay organised. Make it a priority to know what’s due and the deadline for payment. Keep a note of invoices that have been paid. Get a handle on consistent late payers and take steps to resolve the situation. An automated invoicing system may help here, but the buck – quite literally – stops with you.

Be clear about your payment terms

Make it clear from the outset what your payment terms are, and include any penalties for late payment. You can share your terms as a document, a digital form or include details on your company website. Ask your client to sign-off these terms in writing before you start work. Then, everyone knows where they stand and you can move forward with clarity and confidence.

Make sure your payment details are crystal clear

Some clients have a tendency to misplace your bank details when it’s time to pay, so it’s a good idea to make these as clear as possible in all your correspondence with them. Check your invoice design and layout and make sure that your payment details are easy to see. Some automated invoice systems allow you to place a live link in your invoice so that your client just has to click and pay.

Ask for a deposit

It’s common practice to ask for a portion of the payment upfront, especially for large and costly projects. Consider a three-part payment system: an initial deposit, a second payment at a milestone point, and the last payment when the project is complete. This will really help your cash flow.

Tackle chronic late payers

Keep an eye on clients who consistently pay late. If you don’t take action this could easily drain your cash flow. Make a note to call them as soon as the payment date has passed. It may feel awkward but your business is worth it, and there’s often a solution if you talk things through. If you’re at your wits’ end with a chronic late payer, maybe it’s time to respectfully end the relationship and redirect your focus to getting new clients who pay on time.

Need more help with invoicing and cash flow?

Contact our friendly team.