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Tony Allsopp

Has anyone got any tips for avoiding late payments?

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Good Morning 

It's great to see the community up and running. I have a quick question for you all and I'm hoping someone will help with strategies and best practices that individuals or businesses can employ to proactively prevent and effectively manage late payments, ensuring a smoother cash flow and stronger financial stability?

I look forward to seeing your responses. 

Thanks 

Tony 

  • Hi Tony,

    Do you use a digital accounting solution, such as Sage, already? Sage obviously has so many features to help!

    Recurring invoices can help to ensure that you don't forget to invoice your customers if you are providing a regular service at the same price each week/month.

    Sending regular statements can ensure that your customers are reminded of any outstanding invoices due.

    Using the Aged Creditor report can help you to review outstanding invoices and ensure that you make payments on time.

    Signing up to make payments to HMRC by Direct Debit for VAT and PAYE removes the stress of having to set up and remember to make these payments.

    Keeping on top of your bookkeeping (on a daily or weekly basis depending on the size of your business) can help you to see how you are doing and identify potential issues in good time (i.e. customers not making payments on time).

    I hope that some of these tips help!

    Chloë

  • Hi Tony 

    Over the years, I've seen a lot of good and bad invoicing practices. Here is my 5-step guide to invoicing best practice. 

    Step 1—send the invoice in a timely manner
    If your customer doesn't have the invoice, it can't get paid. Invoices that come months after the activity cause confusion because customers can't remember the transaction. Some small companies still save up invoices and send them out weekly or monthly. This creates a drag on cash flow.

    You must invest in invoicing software to issue invoices as soon as the work is finished or goods have been dispatched.
     
    Step 2—be sure, the invoice that you produce is clear and accurate
    Best practice should indicate what the invoice is for, what products or services are delivered, and when. You must provide as much detail as practical, so the customer knows what they're paying for.

    This should go without saying, but make sure your invoice is professional and not handwritten or badly formatted. I've seen invoices that just say, “work done.” This causes confusion and could cause you not to get paid in a timely fashion. 

    Step 3—you need a clear understanding of the internal approvals process
    Understanding your customer’s internal approval process is helpful. Should you send the invoice directly to accounts payable, or should it first go to the person who made the purchase?

    You must also make sure you include any information required by the customer to process payment. This could be a purchase order number, job number, or supporting documentation such as a signed receiving document or approved time sheet. This will be different for every customer, so be sure to ask about requirements before you actually start the work. 

    Step 4—payment terms
    You've got to include clear payment terms on your invoice. Before you started work or production, you should have agreed payment terms. Ensure your invoice includes the due date, calculating this for the customer will help them focus on the date they need to pay you. 

    Most businesses still operate on a 30-day payment cycle. That's not obligatory, you can agree shorter terms to assist your cash flow. It's important that you do this at the outset, and you must monitor customers who are drifting in meeting payment terms and deal with this quickly and firmly.

    Step 5—accurate remittance details
    You must ensure your invoice clearly states all your methods of payment. Make sure your bank details are clearly stated. Include contact details and whether payment can be taken over the phone by debit or credit card, this makes it as easy as possible to settle your invoice. 

    Thanks 
    Andrew 

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