With the average sole trader in the UK owed £200 each month in late payments, Paym’s Neil Aitken shares his top tips for getting paid on time.
The old adage that ‘customer is king’ continues to ring true for today’s small business owners. Service plays a huge part in giving your customers a great experience, but good service doesn’t mean accepting unfair treatment.
Research from Paym, the easy way to get paid using your mobile number, reveals that sole traders can be left chasing up to £208 each month in late payments. This represents a fifth of the typical sole trader’s average monthly income. As a result, nearly a quarter (23%) of all sole traders have given up chasing a payment altogether – forgoing hard-earned income.
As a sole trader or small business owner, it’s likely that you are often paid cash-in-hand by your customers – which is fine, as long as your customer has enough cash on them! Even on a small scale, getting paid late severely dents your business’ cash flow, restricting your opportunities. In the long-term it can substantially inhibit growth.
The good news is that there a number of simple steps you can take to help tackle tardy customers, whilst still serving up the great service your business is known for:
- Set your terms up front
Setting the expectations at the beginning can help to manage customers if things go a bit wobbly later on.
A simple set of terms and conditions should always be written down, outlining your service level agreements, standard invoicing process, refund and exchange policy, and payment terms. Don’t commence work unless you’ve received confirmation of acceptance of these terms. They will also support you if a situation escalates to the Small Claims Court.
- Charge customers for late payments
As a sole trader or small business owner, it’s likely that you have a great relationship with your customers. Though it can be a difficult conversation to have if you’ve built a rapport with a customer over the years, you are perfectly entitled to charge customers for late payments in addition to interest payable at 8% over the Bank of England base rate.
Payments that are less than £1,000 can be charged £40 in late fees and payments of £10,000 or less can be charged £70 in line with the Late Payment of Commercial Debts Regulations 2002.
- Develop digitally
This might sound expensive, but it actually isn’t. It’s now possible to run an entire business through your mobile phone, from apps that deal with budgeting and administration, to social media platforms that have changed the way companies interact with customers.
A mobile phone is crucial to run a business – and Paym means you can use it to get paid straight to your bank account using your mobile number. Paym is offered by 17 banks and building societies, covering more than nine out of 10 current accounts, so it’s one of the best ways to get customers to ditch ‘no cash’ excuses. All your customer needs is their standard bank app – so it’s secure for them and fast for you.
It’s time to put a stop to the excuses and spend more minutes doing what you love to grow your small business.