Late payment is a significant problem for small businesses in the UK, particularly those that supply larger organisations as they have little power to enforce payment without jeopardising their position in the supply chain. In fact, research by the Federation of Small Businesses (FSB) found the late payment of invoices caused cash flow problems for 37% of UK small businesses. They also stated that 50,000 could be saved from closure each year if late payment wasn’t an issue. So, if you run a small business and struggle with late payments, what can you do to improve the situation? Here are 2 ways to get paid on time and take back control of your business finances.
Credit check your customers
Credit checking new customers is a fundamental part of good credit management. The process can be carried out quickly and easily online, and enables you to make informed decisions on how much credit to offer. You’ll be able to view the financial position of each business, the experiences of other suppliers, whether any county court judgements have been made, and if any lending has been registered.
It’s equally important to credit check existing customers, however, as businesses can decline very quickly and you may find their financial stability has changed since they were first credit checked.
Obtaining bank and trade references before taking on new customers is also advisable. The bank will need your customer’s written permission to disclose information to you, and will base their reply solely on the figures you include in your request, often providing general statements rather than specific details.
Automate your systems
By automating your invoicing and credit control systems you can act quickly when necessary, and stay on top of late payments. With many different business software options on the market these days, you simply choose the elements you need, which can make a huge difference to your operational efficiency.
Electronic invoicing, for example, with encryption that protects sensitive data, can considerably speed up customer payments, especially when run alongside an automated payment system.
Enabling customers to pay by direct credit via BACS means you won’t have to wait for cheques to clear – you’ll have access to cleared funds straight away, and can instantly improve your cash flow. You’ll need to let your customers know that you’d like to be paid in this way, however, and provide them with your business bank details.
Get paid on time – where to find out more
If you’re having difficulty getting paid on time you might wish to consider some form of cashflow finance. We have a wealth of knowledge and can navigate what is a complicated market place. There are many options to choose from: unsecured, secured against property, secured against debtors or invoices, short/long-term etc. Our team members can advise and offer guidance so you don’t miss out. Read about our alternative finance options or get in touch to see how we can help.