Posted: Fri 18th Jul 2014
Prompt payment is a big issue. The value of overdue invoices to smaller businesses has grown by almost Â£10 billion over the past 12 months to a record burden of almost Â£40 billion.
This doesn't take into account the non-productive time business owners spend on chasing invoices, which could be time more profitably spent on making sales.
Enterprise Nation is working on a couple of ideas on how this situation can be remedied. To that end, I spoke with Philip King, Chief Executive of the Institute of Credit Management (ICM) and an ardent prompt payment champion.
In efforts to avoid the problem in your business, Philip offers top tips to getting paid on time.
1. Know your customer
Before doing business with a customer, make sure you have the name and legal status exactly right, ask about their payment terms, and invest in a credit reference agency report to make sure they are creditworthy for the sums involved. If you think their payment terms are too onerous, negotiate them down, or it may simply be a case of making the decision to not deal with them.
2. Agree terms in advance
Philip says 'when you sell a product or service to a customer, you agree the product specification or timing of delivery, yet payment is often left out of this conversation - and it shouldn't be!' Have a conversation with your customer to agree the terms and timing of payment so there is certainty in the arrangement, and confirm them in writing.
3. Invoice accurately
Give yourself every chance of being paid on time by including all the information required on the invoice, sending to the right contact, with the correct purchase order number etc. It's worth taking the time to get this right to avoid delays should the detail on the invoice come into question.
4. If you don't receive, then ask!
Keep a record of invoices raised and the date payment is due. If it doesn't arrive, contact your client to question when settlement might be made. Hopefully you only need to ask once. If payment is still not forthcoming, increase the regularity of contacting the client. This may injure the relationship you have but you need to question, if they are this tardy at paying, do you want to deal with them anyway? The money should be in your bank account, not theirs, so don't be afraid to show your professionalism and ask.
For more information on how to agree terms and invoice, access the ICM Managing Cashflow Guides.
Emma Jones is founder of Enterprise Nation