5 Ways To Prevent Late Payments From Ever Happening

Are you doing business with a deadbeat who never pays their bills? Don’t worry, it happens to the best of us. But it doesn’t have to be that way. While every business owner expects to have some level of late payments in their business, it doesn’t have to be a regular occurrence for you. In fact, if you put some basic policies in place, you can dramatically reduce the number of late payments from clients, and keep your business running much more smoothly.

Get Everything in Writing

Get yourself a solid foundation and get everything in writing. Many businesses work on trust, which is commendable, but too much trust can be your downfall when it comes to payments. Make it a part of your standard invoicing procedure to let clients know exactly when their payments are due, and attach a copy of your terms and conditions in writing – and save a copy of that email. This means that your clients are never in any doubt about when their payments are due, and if you have to take matters further than a few prompting emails, you have a nice paper trail to fall back on.

Charge Interest

If clients pay late – charge interest. And don’t just say it – actually do it. Most companies have a clause about late payment fees in their contracts, but the number of businesses that actually follow through on these is shockingly low. You are legally entitled to charge interest if your clients pay late, and you should be charging this either as a separate invoice, or added onto their next one (if the client is on a regular contract). Once the client sees you are serious about charging interest, and that paying late will actually cost them more, they tend to stop paying late.

Provide Incentives for Early Payments

Your clients are always looking out for their own cash flow – just like you. They want to make sure their cash flow is healthy, and that might sometimes mean leaving payments to the last minute, or even a little bit late. But you can change that, simply by providing an incentive for them to pay early. The most common way to do this is with a discount. If your customers are on a regular contract that bills the same amount each month, you could consider giving them a 5% discount if they set up a direct debit or standing order. If they are one-off orders, a discount on future purchases, or off their current order, are also great incentives for them to pay before their due dates.

Consider Outsourcing

 A lot of our clients worry about chasing invoices and late payments, mainly because they don’t want to damage the relationship they have with their client. And that’s very understandable. But chasing still needs to be done, otherwise you might never get paid for the work you do. One of the ways around this fear is to outsource your invoicing. Invoice management companies, or even just a VA, can handle the creation and sending out of your invoices, and the chasing as well. Because they are an external person you don’t need to worry about harming any relationships, and your clients are likely to take you more seriously and get their invoices paid if they are being issued and chased by a third party company.

Electronic Only

One of the advantages of the modern world is that it’s never been easier to do things electronically. This means you don’t need to worry about printed paper invoices getting lost in the post, or accidentally shredded on arrival. Invoicing customers online not only makes it easier to provide a paper trail in the event of a dispute, but it makes it much easier for clients to pay promptly. Many online accounting software packages can send invoices out automatically, and provide clients with a big ‘pay now’ button. This prompts clients to get payments done as soon as the invoice hits their inbox, and means you will see earlier payments from more clients. So if you are still using non-digital methods, it might be time to ditch them and move into the 21^st Century.

At Debtcol, we specialise in helping business owners not only recover money owed to them by clients, but also putting systems in place to ensure late payments become a thing of the past. Our debt collection experts are always on hand to talk through your options and make suggestions about how you do things, so that you never have to worry about late payments again. If you would like to know more, just get in touch with the team today.