A report published by MarketFinance on 9 December 2019 indicates that small businesses are having to deal with late payments regularly.

The study showed that UK SMEs are often waiting for up to 23 days for late payments in 2019, whereas the year before the average wait for late payments was 12 days.

Late payments for a small business can have a significant impact on their cash flow and makes it more difficult for them to put any plans in place to grow their businesses. Here are a few tips which may help you to reduce the number of late payments you have to deal with each month.

1. Be clear about your payment terms – Most businesses have payment terms of 30 days. If this is the case, then make sure that all your customers are aware of this from the outset. You may decide to reduce the payment terms to 14 or 7 days, this does help with cash flow, again make sure your customers know if and it's clearly stated on the invoice.

2. Ask for an upfront payment – If you are working on a big project and this will take a while to complete, it may be worth requesting a deposit at the start and maybe some payments during the project. This helps with cash flow. At the end of the project, you are not chasing such a substantial amount of money.

3. Go digital – If you use accounting software such as QuickBooks, Xero or Sage, it can help you to generate invoices and keep track of payments quickly. Put in place a transparent process for chasing late payments very promptly after the due date. All contact either via email or phone should be professional, and polite so that the customers are more likely to respond positively to being chased.

4. Make it easy for customers to pay – Everyone is busy. If the process of making a payment is very complicated, then it increases the likelihood that customers won't get around to it. Making payments online via BACs is usually the most convenient way for a person to pay. If you have to bill a customer every month, then suggest setting up a standing order, direct debit or you can use GoCardless. This saves the customer time and ensures you get paid on time.

We hope these tips helped you consider what you can do differently to reduce the number of late payments each month. If you need any more advice, please do contact us.

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