I’m finding that many of our bills are being paid up to a month late. How can I protect my business against late payments?
Late payment is a big issue – especially for the smaller and medium-sized businesses in the retail sector. Experian data shows that retailers’ bills are currently paid on average more than 30 days late.
For those faced with this dilemma each month and given the tough market conditions at present, late payment has become a major cause of cash flow problems. “Pre-screening potential clients is the one step retailers can take to ensure they are only taking on those likely to pay on time and, more importantly, pay at all,” says Simon Streat, managing director of Experian’s UK SME business.
With every client, payment terms should be agreed in advance and you should make sure that the terms are binding, getting the client to sign up before providing them with any goods or services. Include your terms and conditions on any invoice, and discuss any problems with the customer before raising an invoice. “You may want to consider offering discount for prompt payment or using credit insurance. Encouraging firms to pay electronically may speed up payments, while forming a relationship with your customer’s credit control department will help you should accounts become overdue,” says Streat.
It’s worth chasing accounts early, even if there appear to be no recognisable issues. “Contacting customers whose accounts are just about to become due will help identify issues in advance,” he adds.