Tips for Getting Your Invoices Paid (and not lose your customers)
Cashflow is vital for any SME, particularly creative businesses that often experience ‘lumpy’ cashflow, so one of the biggest problems they face is late payment of invoices. In Britain we are especially slow at paying our bills. In 2022 the Federation of Small Businesses (FSB) reported that 52% of small business owners were experiencing late payment issues – and 25% had seen an increase in late payment. With the arts being one of the most affected sectors, this is a big problem when late payment can mean a risk of closure or job losses.
When a client is late in paying, there are some things you can do. First of all, just fire off a friendly reminder. We’ve all been there, especially if you run a small business and are wearing most of the hats in the company. They probably just left their payment-making-beret at home that morning.
If that doesn’t have a desired effect, you may need to send off a firm letter reminding your client that they haven’t paid, explaining the costs involved in doing so (hopefully, you have put an interest rate charge for late payment in your agreement) and offering a new deadline to pay.
In 9 out of 10 cases, you will have received your payment by that point. If you still haven’t received payment, there are other actions you can try. However, you must be prepared that by the time you reach this stage, you are likely going to be ushering in the end of your business relationship with this client. Maybe that’s not a bad thing, after all, if they don’t value your service enough to pay your bills, then maybe they are not the right client for you.
Your recourses at this point are
- Getting your solicitor on board to write to them.
- Register a complaint through Small Claims Court.
- Hand your debt over to a debt collecting agency.
Really, none of these options are particularly attractive, or necessarily productive. So, by far the best approach is to avoid late payment problems from the outset with a little bit of preparation when you sign a new client. Here are 7 tips to help you get paid on time.
7 Tip to Get Your Invoices Paid
1. Try to get a feeling for your potential customer’s reputation, put your feelers out and run a credit check if that’s possible. Also, try to get to know them, or the person who makes payments, if you are on a friendly basis it will be easier to collect your payments.
2. Agree the payment procedure in a contract or agreement. State your terms and conditions clearly, so there is no confusion about when fees are due (and overdue).
3. Where it is appropriate for your business, request your payment up front, or a deposit.
4. MAKE IT EASY TO PAY. We can’t emphasise this enough. Using an accounting software (at Artisan our clients mostly use Xero) to invoice and allow your clients to pay with one click will remove a lot of the causes of late payment that come with just being human and busy!
5. Consider switching to direct debit. It’s no longer the preserve of companies with a high volume of transactions. We use GoCardless, which integrates with Xero (and others). It takes the pain out of the process for both you, and your customers.
6. Invoice promptly. When you have completed the work, at agreed stages, or monthly/weekly depending on what works for your project. Again, an accounting software will cut out a lot of the leg work here, otherwise invoicing goes to the bottom of your to-do list too, right?
7. Schedule in friendly reminders so you don’t forget to chase payment. Yep, Xero can do that too. If you like your apps (sorry, we’re a bit addicted), there are several that specialise in just that. Chaser is one app that, as the name suggests, chases unpaid invoices. It integrates with most accounting packages and automates very politely but persistently.
Automating as much of the process as possible will take much of the heavy lifting out of getting bills paid for you and your clients. It can also help you to take a step back and removes some of the emotion involved. We can support you to get a system up and running that works best for you. If that sounds welcome, get in touch with us and we’ll help you with your specific needs.
For more information about payments and interest debt recovery, visit here.
