Overdue invoices and 10 things to do to get paid on time
Overdue invoices and late payments are often a problem for many businesses. Here are 10 things you can to do improve your chances of getting paid on time.
1. Always check the credit rating of your customers.
Don’t just take your customers word for it when they say they can pay, be certain and check for yourself.
Doing a credit report on your customers will help you make an informed decision from the very start as to whether you think they will pay you on time. You do this by obtaining a credit report online.
2. Remember to obtain all of your customers details
Full company trading name,invoice address, company number, telephone number and email address. So when it comes to collecting a late payment (overdue invoice), you already have all the details to effectively chase the payment with a polite but firm reminder.
If you think you don’t have all the details for your customers, contact them now to get them. Alternatively, each time you speak with one of your customers, check their details and update where necessary.
If you don’t have one already, use a “new customer account form,” which lists all of the relevant information you need to obtain from your customer. There is a free template to download below.
3. Always invoice your customer right away.
It is important to give your customers all the information they need to pay you to minimise any queries and excuses.
Make sure your invoice states the date that payment is due, your business sort code and account number and company address.
4. Remind your customers
The “Late Payment of Commercial Debts (Interest) Act” gives you the right to apply a late payment fee and interest to overdue invoices. To work out what late payment fee and interest you can add to a debt click here
5. Put a credit control process in place!
Create a guide to follow to ensure your customers pay you to your terms.
6. Don’t be afraid to talk about money
Before you complete a sale with your customer discuss what your payment terms are. Inform them when you expect payment and ways they can do it. Being open about how you operate and what you expect is always the right thing to do. Talking about money and your payment terms is a necessity in business.
If your customer is wavering on payment, don’t leave it and think they will pay you within a day or so. Call them or email them with a polite reminder. Perhaps your customer has simply forgot to pay you, or perhaps they didn’t receive your invoice?
Ensure that you have a process in place to establish when the invoice is overdue! Then stick to your process.
7. Are you making it easy for your customer to pay you?
There are so many options these days.
Instead of cheque payments, which take time and cost money to bank, try these more effective, time saving payment methods: Bacs, Paypal, PingIt, Stripe, Credit / debt card etc. Make sure you have lots of payment options available, which help reduce late payment excuses from your customers.
Customers making late payments is a common and frequent occurrence to many companies. There are several reasons for this, some of which are removed when you have a good credit control process in place.
There are ways to limit the amount of excuses a customer can give you by making it easier for them to pay you.
8. Say Goodbye to Cheques!
A common excuse regarding lack of payment is “the cheque is in the post”. Although we acknowledge that this is often a ruse to delay payment, the use of mail services does carry that risk.
One way to tackle this is by offering electronic methods of payment.
Although cheques are still widely popular, we recommend converting to electronic methods where possible. This cuts out the delay of postage and clearance time and it eliminates the need for that famous excuse.
9. Debit or Credit?
Debit and credit cards are another quick and easy way to obtain payment.
By using portals such as Worldpay or PayPal a payment can be transferred between accounts easily or taken over the phone.
This is useful for a customer that you are struggling to get payment from. If they will answer your calls, offer to take payment there and then.
10. Disputes
Your customer didn’t get what they thought they were getting! Your customer was unsatisfied with your product or service.
Deal with disputes and complaints professionally, meaning don’t shout at them or even try to belittle them.
Back up all telephone conversations with emails and keep a record of absolutely everything. If your customer isn’t right and should court action be necessary to receive your payment, it will look better to a judge if you have a record of everything written professionally.
If you are struggling to obtain a payment yourself, our business debt collection services are very cost effective!
Technical Terms
Credit Control: the practice of making sure your customers don’t take too long to pay you.
Purchase Ledger: also known as “accounts payable” or “supplier accounts”: This is the record of your purchases and expenses, whether or not you have paid them and how much you still owe.
Payment terms: these are the terms that you set to specify the time allowed for a buyer to pay off the amount due to you.
Day Sales Over Due (D.S.O): average number of days that receivables remain outstanding before they are collected.
Credit Terms: time allowed / allocated which indicates when a sale is due for payment.