How SMEs can overcome slow payment culture

96% of UK firms are micro businesses, and they’re a vital part of the economy. But a new survey by accounting firm Intuit has found that they’re collectively owed £16.9bn of customer debts. Challenging late payers isn’t easy, but small changes can make a big difference.

Run new customer checks

If your business relies on large, infrequent orders, an unreliable new customer can become more trouble than they’re worth. Advance credit checks can be useful. Alternatively, ask for proof of business earnings, request a guarantor or require payment up front on first orders.

Invoice promptly

According to Intuit, just 36% of micro businesses invoice via email, many use much slower paper and postage methods. Some even wait a month before sending them. Automated electronic invoicing processes can cut delays and ensure your clients know you’re on the ball.

Charge interest

Unless you’ve agreed otherwise, payments are legally considered late 30 days after invoicing or when your customer received the goods/services (if later). After that you can charge interest. It’s only fair, and it’s a powerful incentive for clients to pay on time.

The current statutory interest rate is 8.5%, and you can charge debt recovery costs too. Check Gov.uk for the latest government-approved figures.

State your terms

Your terms should be clearly stated on your invoices. Don’t leave any excuses for late payment. For extra clarity, include your bank details and information for all possible payment methods too.

Set up reminders

All clients should know exactly when they need to pay and what will happen if they don’t. Schedule regular email or phone follow-ups and regulars will quickly come to expect that phone call or email ‘checking in’ every two, three or four weeks.

Challenge non-payers

Friendly reminders don’t always work on repeat offenders. Be ready to warn of interest payments, the risk of legal action and that debts may be passed to a professional enforcement officer if late payment becomes a problem.

Innovate

Show your customers that you’re willing to meet them part way, whether it’s by giving them dedicated customer service representatives to talk to if they’ve hit financial trouble or introducing the latest payment technologies to make it quick and easy to pay.

If you need help recouping unpaid debts in a timely and sensitive manner, contact Dukes Bailiffs today.