[10.07.17]

It doesn’t matter how successful your business is in terms of the amount of work you’re getting, how many clients you have or how much work you are invoicing each month if those invoices are not being paid. If your invoices are not being paid on time – or at all – on a regular basis then you are soon going to have a big problem. Working capital is vital for the survival and success of your business and the more money you have outstanding, the greater the risk to your business.

Slow payment usually affects smaller businesses more as they tend to be more susceptible to cashflow problems and have less cash to cover outstanding invoices. This can be even more of a problem if your business is reliant on a small number of customers – you can soon find yourself in a situation where you cannot cover essential bills to keep the business afloat.

How proactive are you at chasing up payments? Maybe it’s time to consider putting a consistent strategy in place to target persistent late payers:

• Be proactive about contacting customers to chase payment.
• Contact customers immediately when a payment is late – if you fail to chase up invoices promptly, customers may well put you to the bottom of the pile and prioritise the businesses which do chase them for payment.
• The advantage to being consistent and getting in regular touch with customers regarding outstanding invoices is that, if handled sensitively, it can be treated as a way of furthering the business relationship – regular phone calls can help to build relationships, so treat these phone calls as customer service rather than credit control.
• Make sure you always have an accurate picture of what invoices have been sent, when they are due, ones that are close to falling due and any that are overdue.
• Problems can often be pre-empted with larger invoices by making a follow-up call following issue of the invoice – check it was received, that the right person has it, and that there are no queries or missing information.

There may well be instances where you have to ultimately resort to legal action but by managing your credit control effectively you should be able to minimise these instances and ensure timely payments.

Castletons Accountants