The best ways of managing late payment
How can I avoid late payment by my clients?
Late payment is a huge problem, particularly for small to medium sized businesses which may struggle to stay afloat if bills are not paid promptly. Managing late payment of debts is a crucial skill for anyone starting out in business. Fortunately, there are a whole variety of methods which can be adopted to try and prevent late payment becoming a problem in the first place. These include researching a new client to find out if they have a bad credit history - simply checking out their profile on the Companies House website (http://www.companieshouse.gov.uk/) can throw up some interesting information. You can also use a credit checking agency to dig a little deeper. But even if a client is deemed to be creditworthy, it’s important to clarify payment terms right at the beginning of a contract. This allows both parties to know exactly where they stand and helps resolve disputes if they arise.
How do I deal with a client who isn’t paying on time?
Sometimes all the planning in the world still fails to prevent a situation where you faced with having to chase up invoices or debts from a client. It’s important to be diplomatic in these circumstances. Although you may be in the right and would win the argument if it went to court, souring a business relationship may cost you far more in the long-run than simply waiting longer to receive payment. A friendly phone call or email may be all that is required to nudge your client into paying your invoice. If you would like to be a little more formal, a statement of account can provide a useful means of setting out any outstanding balances without getting litigious.
If you have substantial numbers of clients, maintaining organised records of invoices and payments can help to establish a pattern of any bad payers. You may decide to update your terms and conditions with any financially risky clients or even terminate a contract. Taking more drastic steps to recover debt, such as instructing a debt collection agency or going to court, should be avoided as these can be very expensive and will likely bring the business relationship to an end.
A variety of documents which may help with late payments can be downloaded from our Business Documents Folder. Click on any relevant templates in the list, below, for further information.