Tackling Late Payments
The Small Business Commissioner, Paul Uppal, has been tasked with tackling late payments for small businesses... We all know the pain of juggling cashflow because a client has been late to pay. The knock on effect means you can't pay your own suppliers - or maybe it means you are late paying household bills?
Getting paid - starts with invoicing
First thing first: Did the client sign a contract?
What proof do you have they agreed to pay your fees? Email or digitally signed documents do count, but you need to gather them together. Was there an outline of the work agreed?
Secondly: Did you complete the work to the client's satisfaction?
Gather evidence of that - that might be an email from the client acknowledging the work or saying well done. It might be physical proof in the form of documents/files which you've created.
Thirdly, was your invoice correct?
Did it go to the right person? Did it need a purchase order number? Was it properly addressed? Did it have all the details on it which enables the client to pay? What were your payment terms? Was it clear how you were to be paid?
I've not been paid - what now?
There's already a fair bit of help out there if you have an unpaid bill:
- Best advice: Pick up the phone... Find out why it's not been paid. Emails can go to spam, they may simply have forgotten about it. Don't get off the phone till you have a payment date from them. Be persistent. Don't do any more work till it's cleared.
- FSB: Offer a free debt collection service if you are a member.
- Small Business Commissioner: Has lots of advice for specific industries.
- More advice from SVA on debt collection to tackle late payments
You may be able to charge late payment fees on top of your invoice. In reality these sometimes cause more hassle than they are worth and delay payments even further, especially if the issue is to do with inflexible accounts depts.
Downing tools? Bear in mind, you still need to stick to your side of the contract. Read up what happens about confidentiality and materials you may hold in your contract.
Lastly, a big consideration: Do you want to keep working with this client? Sometimes you will know there's no way you want to work with them again and therefore you can pursue payment more aggressively. But if you want to continue working, you need a way of keeping the communication open and making sure you get paid too!
A few suggestions for dealing with late payers:
- Ask what the issue is - does their accounts dept pay on a specific day? Does the person who signs off the invoices only work part-time?
- Ask if you can invoice more regularly - less cash to cash and hopefully some of it comes through sooner.
- Explain the late payments are causing issues... Their forgetfulness is having an impact on your business - TELL THEM THAT!
- Put them on a DD with GoCardless - so you control the payments.
- Get them to pay upfront - lots of VAs work this way, you can just say it's a change of policy and all your clients are now going to be working this way (makes it less personal!).
Further reading:
Very helpful bits of advice, thanks!
Your contracts can give you the right to stop work if payment is late. There are lots of other bells and whistles you can use too.
But learning your client’s payment cycles and invoicing before the client’s cut point is a great key. If you insist on invoicing at month end and your client pays at month end you will always be paid late. I am often surprised by how people don’t join up the dots.