You’ve worked hard to launch and grow your business. Don’t let late payments hold you back.
Does sending payment a day or two late really matter? Absolutely, but it’s still something business owners are all too familiar with. Especially since 1 in 10 small businesses in Europe get paid late, with 33% of late invoices dragging on for more than a month.
Late payments can slow down business growth and hold you back from paying bills on time, but that doesn't have to be the case for your business. There are some simple steps you can take and tools you can use to make on-time payments the norm for your clients. Read on to learn how to get prompt payments, every time.
Check credit scores
Want to learn about your clients before shaking hands with them? By looking at their credit score, you can get a good idea of how they manage their cashflow and debt repayments. You can use services like Experian’s credit check report, which will show you how financially stable they are before you decide to work with them. A business with a higher credit score is likely to be less risky as they have more stable, predictable financial behaviour.
Ask for a deposit
One way of keeping your cashflow steadier is asking clients to pay a percentage of your fee upfront. This is something we’d recommend if you’re working with new clients, where there’s likely to be more risk. It’s a great way to confirm that they’re serious about working with you, and it means you’ll have financial protection in place if they can’t pay you further down the line.
No matter what your business does or how big it is, you can ask clients for a deposit. Whether you’re a big consultancy, a restaurant owner, or a dog groomer, it’s a clever way to protect yourself and your cashflow.
Tighten your payment terms
This means reducing the payment window, so clients have fewer days to pay. This can be a good idea for repeat clients who have been known to pay late. You can also think about charging interest for late payments and increasing the interest rate with time, to make paying on time all the more appealing.
Agree your terms, in writing
This is an absolute must. Before you do any work for your client, your payment terms should be agreed in writing. Draw up a contract and don’t start work until you and your client have signed it. There are some handy online contract tools, like PandaDoc and DocuSign, which can help make the drafting and signing process a little easier for you.
Consider trade credit insurance
Well-known insurance firms like Allianz and Coface offer trade credit insurance, which protects your business against clients’ poor payment practices. It means that if a business pays late or becomes insolvent and can’t pay at all, the insurance provider steps in and covers the costs. There are lots of options to consider, so do your research to decide which policy and provider suits your business best.
Let technology do some of the hard work
Chances are no one wants to spend lots of time chasing invoices. Luckily, there are tools that can reduce the amount of time and energy you spend. Try Quickbooks, Xero, NetSuite, Tipalti or GoCardless to make the entire process quicker and easier. You can use any of these platforms to create, send, and chase invoices – and each offers payment automation too, so you can spend more time focusing on building your business.
You’ve worked hard to get your business up and running. It’s understandable that you’d want to reduce the risk of other business’ cashflow affecting its success. Taking these measures can help you take back some control, and hopefully reduce the risk of late payments harming your business.
Want to chat through your options? Our V-Hub Digital Advisers are here to help. Reach out today for free, impartial guidance.
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