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How to prevent overdue invoices in eight easy steps
Gary Prince, chief strategy officer at SimplyPayMe, writes…
A report from earlier in the year by the Federation of Small Businesses has found that 440,000 small firms in the UK were almost forced to close due to the late payment ‘crisis’. This crisis calls for businesses to take a look at the way they're paid and put in place a framework to ensure that invoices are paid correctly and on time.
In any business, cash flow plays a fundamental role, and this is especially true for small businesses and sole traders. Customers with late payments can lead to disastrous problems for the business owner and their staff.
Preventative action is the best way of ensuring you're never left hung to dry. Here are eight easy steps that can prevent overdue invoices.
1. Be explicit in your payment terms…
Make it as clear as possible from the offset, what your payment terms are. Include when your payment is due, when the payment is overdue and what consequences will follow ignoring any of these rules. You should try to customise these terms to your business needs, taking into account cash-flow considerations.
By stating this information clearly from the beginning, you can deter your customers from paying invoices late. This can be particularly helpful and, remember, these terms can be malleable - if you need to adjust them from client to client depending on history you can do so.
2. Ensure your client is trustworthy…
The best way to ensure that a client will be able to pay you is to run credit checks on them. A credit check has the power of offering you essential information on your client that can aid you in deciding whether to onboard them in the first place.
This will prevent issues further down the line or any surprises from their side. Do remember that you will likely need to provide specific identifying information about a client, and you may also need their authorisation.
3. Determine late payment policies…
This is another way that you can hope to prevent your clients from paying you late. You can decide on fees or interest to be included in your payment terms for late invoices and this could act as another deterrent for late payment.
Make sure to stick to any late payment policies you agree upon - don't sell yourself short!
4. Automate your payments…
Finding a sophisticated direct payment platform, like SimplyPayMe, to automate your payments is another way you can avoid late payments. These platforms can handle the entire process on your behalf - from invoices to automated reminders to payment collection .
5. Request an upfront payment or deposit…
By having an upfront deposit or payment you can avoid some of the concerns surrounding late payments and focus on the project at hand and your work.
Remember to keep these requests professional in manner, but don't be afraid to ask for a deposit or upfront payment if you feel that would offer you more security for your work.
6. Invoice immediately after work completion…
Make sure that you invoice your client immediately after the work has been completed. This is your signal to them that it's time for them to uphold their end of the agreement.
Not only will this help you keep on top of managing your invoices but it will also remind your clients that you take the project and the work you provide seriously.
7. Schedule polite reminder emails…
This is another process that can be automated to help you save on time and worry. Polite payment reminders will help to ensure that your payment doesn't slip through the gaps by reminding your clients when payment is due .
8. Establish good relationships…
Making sure you establish and maintain a good relationship with your customers that you are invoicing is invaluable to making sure you are paid on time. They will feel more inclined to pay you on time and preserve the relationship with you.
It will also give you more confidence in ensuring that you get paid promptly if you feel like you can bring up the issue if need be, in a non-argumentative or accusatory manner.
All of these steps can help prevent late invoices, which can cripple sole traders. Late invoices slow the cash flow that you need to stay afloat - so by managing how you onboard new clients and keep up to date with your invoicing requests, you can prevent late invoices and keep your business going.
With a platform such as SimplyPayMe, you can simply set your preferences and let the app do the rest. You will be able to chase customers via Email and SMS at your preferred times to ensure your outstanding invoices are settled.
6th October 2022