Thursday, 4 October 2012

Calling Time on the Late Payers!

By The Business Battle-axe, Amanda Vigar, 
Managing Partner, V&A Bell Brown LLP

Whether you are in business or not, you’ll have heard the phrase ‘cash flow is king’, many times before. The saying has never been more true in the thick of a recession when businesses of all shapes and sizes are going to the wall; quite frequently due to the mammoth task they face when trying to balance the books.

Yet, one of the most difficult tasks any small business owner can face is how to chase up an overdue invoice. I say difficult because the SME has to navigate a tricky path between having their bill paid and not falling out with the customer. Here are some tips that will help any small business owner chase up overdue invoices:

     Check payment runs - find out when customers make payment runs and what the cut off is. There’s no point in submitting the invoice on the 20th if the cut off for that month's payment run is the 19th!

     Make it easy to pay – You should have a clear collection policy in place outlining credit terms, how you will collect money and any overdue payments.
     Make invoices clear – having a good system in place to record invoices is key. There are many software packages available so you can also track payments. Remember also that, the last time a company can object to an invoice they receive is on the day they receive it. After that time, they cannot quibble and dispute it.       
    Follow customer instructions – large companies in particular often have strict systems for paying. Maybe they want a special invoice number – so make one for them. Also ensure that it’s consistent throughout your communications to avoid confusion.

      Follow up promptly – Make sure you have a consistent collection procedure and always follow up as promptly as possible. Keep a close eye on patterns in which clients generally pay; and ask yourself whether this fits in with your billing cycle? If the client does not pay ten days after the invoice is due, send them a ten-day letter re-iterating the fact that the invoice is due and (politely!) asking for payment.

     Be polite – Shouting threats is not going to do you, or your business, any favours. If all else fails, and the client is ignoring you, or refusing to pay the bill, then consider whether you really want their business in future, and make a decision about whether or not it’s worthwhile to take them to the small claims court. You can process a claim for money owed up to a value of £25,000 online at This covers most debts owed to SMEs; but if the debt exceeds this level, consult a solicitor.

     Consider as well that the business could also be going through tough times, or they could be unhappy with the service you have provided. Either way, your main aim is make them pay their bill. Cash flow is king, remember. 

1 comment:

  1. Well said Amanda. We've been banging on for ages about re-uniting money with its rightful owner and its free! ... why allow other businesses to use your money as an un-authorised overdraft is beyond me!.

    When the internal credit control function has been exhausted? where do you go for a cost effective solution? ... may I suggest out of pure self interest? :)