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Getting Paid on  Time – Part 2

Part 2 of our how to get paid on time guide

Invoices

Sounds obvious, but make sure you state your client’s full business name and address on your invoice.  Your invoices should be absolutely clear as to what sum is to be paid, by what method and by what date.  State your preferred method is by BACS and include your bank details.  Don’t use personal PayPal accounts as you pay fees and the payment doesn’t always come through straightaway.   Hopefully you will discourage cheques – not only do you have the worry that a cheque might bounce, you have to pay bank charges and someone has to traipse to the bank.

Depending on the size and type of your business your client is they may issue you with a purchase order.  Quote this number on your invoice.  If not, refer to the date you were instructed to do the work, such as ‘Email order of 30.4.13’.  Itemise each piece of work/item clearly and include a timesheet if appropriate.

State your terms whatever they may be, 14 days, 30 days etc, and the interest rate you will charge for late payment.  You can clearly state that you will pursue unpaid debts by stating something like the following:

“We understand and will exercise our statutory right to claim interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to agreed credit terms. Failure to pay within X days will result in interest being charged (at a rate of 8% over base rate £20) per month on outstanding balance.”

Chasing late payers

So you’ve made sure your client has agreed to your terms and  you’ve sent the invoice using the tips above and you still have no payment.

Make sure you (or someone else in your business) allocates time to check outstanding invoices and to follow up appropriately.  It’s good practice to check bank accounts daily.  Make sure you have some system in place whether it’s via your accounting system or a basic spreadsheet, to see quickly who you have invoiced and who has not paid.

A polite phone call is the best option initially.  State when your invoice was sent and was due for payment, but nothing has been received yet.  Can they tell you when the invoice will be settled?  Don’t say “Did you get my invoice?”  – this gives them the chance to say no!   But of course, if they say they haven’t had it you will have to send them another copy.   If you get the usual response that the cheque’s in the post, ask them for the cheque number.  You may need to give them another window of time for payment to reach you.  Make sure you log any phone conversations and get the name of the person you talked to and their email address.  If the agreed payment date comes and goes, call again and/or email.

What if they still don’t pay despite these reminders?  Check out a website called Pay on Time – www.payontime.co.uk – which has templates for letters from first reminders through to notice of court proceedings, plus late payment calculators and plenty of other resources.

Pay on Time also has a list of top payment excuses and how to handle them:  https://payontime.co.uk/news-and-information/the-cheque-is-in-the-post-ten-late-payment-excuses
As a member of Pay on Time you get access to extra resources and best of all, it’s free.  You can put their logo on your website showing potential clients that you are reliable and trustworthy both as a supplier and a client.

You can now pursue the debt yourself through the small claims court or instruct a solicitor or debt collection agency.  There are agencies who can take on smaller debts as well as bigger ones.  Unlike solicitors, agencies will take their fee as a percentage of your debt.  They will need copies of invoices, contact names, telephone numbers and any other relevant information.   Court fees will be payable by you.  However, they will be added to your debt and become payable by the debtor.

Invoice Discounting and Factoring

This may be a good option for bigger businesses with an annual turnover of at least £50,000 (although some will consider start-ups and smaller businesses). You need a good spread of customers with low levels of debt, generally no more than 90 days overdue. These services are usually  offered by banks and private companies.  What happens is that you raise your invoice  requesting the customer to pay the factor.  The factor credits your account with around 85% of the total invoice value within 24 hours, then when your customer pays the invoice, the factor credits the remaining 15% to you when charges will then apply.

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