Small businesses need to chase payment when customers delay in settling invoices.
The issue of late payment is back in the news, ahead of next week’s cross-party inquiry into the time it takes to settle business invoices.
Small and medium-sized businesses (SMBs) in particular face a tough time with late payment – last year Bacs reported that such companies are owed a staggering £33.6 billion in total.
But what exactly can SMBs do to ensure prompt payment? When they are dealing with large partners and suppliers, they inevitably find themselves in a weak bargaining position.
So what can SMBs do to manage their cashflow, and ensure late payment does not put their business in jeopardy?
Having a clear credit policy is a starting point – decide upon a realistic timeframe for payment and when this is not met, make sure you chase this up.
Charging interest on overdue payments may be an option if it is written in your contract – this may have the effect of encouraging a speedier resolution.
SMBs need to be polite but firm when chasing payment – at times there may be a need to be persistent, if a customer continues to delay.
If they are still unable to secure payment, legal action may be a valid response – what SMBs cannot afford to do is simply write business off as a bad debt.
Posted by Sarah Parish
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