Late payments are a persistent problem for many small business owners. According to the Federation of Small Businesses, 37% of small businesses have experienced cash flow problems because of late payments. If all invoices were paid on time in the UK, 50,000 more businesses would stay open.
If you’re putting up with late invoices, it’s important to get the money you’re owed. Even if it feels a bit uncomfortable to chase late payments! This is how to chase late payments without burning any bridges unnecessarily.
Remind them as soon as the payment is late
Sometimes invoices are buried in inboxes, or a customer forgets to comes back into store to clear their balance. A gentle nudge is usually all it takes.
Email is the easiest way to send a polite reminder. If you have a personal relationship with your customer, you might want to pick up the phone first before you put the reminder in writing. Let them know that payment is due, remind them of the payment details they need, and thank them for their business.
Chase the right person
The person you’ve been working with might not be the right person to chase for payment. It depends whether your client is an individual or a larger business. If they’re an individual, you know exactly who to talk to. If your late paying client is a larger business than yours, you’ll probably need to contact whoever deals with accounts.
When you’re chasing, find out who signs off on payments and address them directly. Otherwise, your email could sit there unanswered for a while.
Know your legal rights
If one of your clients is very late, and ignoring your requests for payment, it’s time to get tougher. According to the Late Commercial Payments Act, you can add interest and an extra fee when the invoice becomes late.
Understandably, your relationship with the client may suffer, so it’s often a last resort before either writing off the invoice or taking it further.
How to speed up future payments
Preventing future late payments will save a lot of potential headaches, as well as help keep your cash flow healthy.
It’s difficult to keep track of due dates, and which payments are late when your invoices are in a muddle. With automation tools, reminder emails are sent to the customer automatically. You can set them to go to the recipient on the due date, several days after, and on specific dates until the invoice is paid.
Offer an early payment discount
Incentivising early payment is often a lot easier than chasing late ones. Offering a small discount will show your clients and customers that it’s in their interest to pay early. Just a 5% or 10% discount will make a difference. You won’t lose out too much financially and your payments will be much more likely to come in on time.
Invoicing tip! Make sure the discount is clear and obvious on the invoice so your clients know they’ll benefit from paying up fast.
Ask for a deposit
Data from accounting tool Xero shows the average 30-day invoice was paid 10 days’ late. If late payments are a regular monthly reality for your small business, asking for a deposit can make life easier. You’ll get a percentage of the invoice up front, which helps with cash flow now and in the future.
Raise £3,500 to over £500,000 for your small business
If you need help with cash flow, Capify can help. You’ll repay in small, manageable amounts as cash comes into your business, so you can comfortably afford repayments.
Get started with a quick quote.