This week marks Small Business Advice Week, and as part of that, commercial finance house Funding Invoice has put together a checklist for small businesses plagued by late payments. It’s a problem that affects tens of thousands of SMEs every year, so getting ahead of the late payers is vital in this competitive environment.
Funding Invoice helps SMEs with their cashflow and working capital needs, so with that in mind, their CEO Aamar Aslam has put together a checklist to help SMEs throughout the late payments process, from pre-empting delayed payment, dealing with it, and preventing it from occurring in the future
Start as you mean to go on
Stating and agreeing payment terms at the start of any new customer relationship, or a new project with an existing customer, is crucial. SMEs must ensure their payment terms (e.g. 7, 14 or 28 days) are displayed in large, clear font from the first invoice. Not wanting to upset customers through chasing payments is less important than the financial stability of your business.
Send out invoices on time
It may seem like an obvious item to check off the list, but the first step to prompt payment is to send out invoices before the payment is due. In the excitement of working with new customers, administrative tasks such as sending out invoices are not always a priority, and in certain industries, can become lost in the supply chain. Organisation is vital here.
Monitor payment due dates
If an invoice is not paid on the date it is due, it is important to action receipt of the funds due as soon as possible. By allowing invoices to remain unpaid for days, or even weeks after the original due date, SMEs will encourage bad payment habits among their customers, to the detriment of their business.
Involve a third party
If weeks, or even months have gone by without payment from a customer, it is time to look for third party support. This could be an alternative finance firm to provide funds from unpaid invoices in the short term, or a solicitor to demand funds owed are repaid. Some alternative finance firms will chase customers on a business’ behalf as well, so this should be also considered.