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Devils, Worms and Vinegar - How to Tackle Late Payment
by Startacus Admin
Are you a Small Business or Startup affected by late payments?
The answer is most probably, yes, and with this in mind we asked Zervant providers of online invoicing software to over 70,000 entrepreneurs and small businesses for some basic tips that should hopefully help. Over to John from the Zervant team to explain all.
Late payment is more than a problem, it’s verging on an epidemic in the business world. Latest researchshows that at any one time 45% of all invoices sent by entrepreneurs and freelancers are overdue, and that the average small business is owed £20,937 in late payments. BACS estimates that a collective £10.8 billion is spent every year on trying to recover these payments, which works out at £11,500 per business, in other words £955 a month.
The tide is (slowly) turning, with things like the announcement of a Small Business Commissioner, and the introduction of the “Small Business, Enterprise and Employment Act” last year. But this does little to solve the problem of late payment in the here and now. And whilst there is no magic wand you can wave to get rid of late payment, we’ve tried to alleviate the pain by compiling this list of our six steps for tackling the problem!
If at this point you’re rolling your eyes and thinking, “great, yet another listicle with the same, rehashed information”, you’ll be pleased to know that we’ve tried to spice our list up a bit by adding a few twists to it.
6 Tried and Tested Steps for Tackling Late Payment
To make our list a bit more of an enjoyable, exciting read, it includes things you probably wouldn’t normally associate with late payment - devils, a few worms, and even the odd splash of vinegar.
No, we haven’t lost it (promise!). To lend an air of authenticity to these tried and tested methods we’ve themed them all around old English sayings and proverbs. Hopefully it makes them a little easier to remember too.
Step 1 - An Ounce of Prevention is Worth a Pound of Cure
This step needs to be done right from the off, before even starting any client work. Following your first meeting, make sure you send your client an estimate or proposal, including key late payment information - deadlines, payment terms, late payment interest, etc. You can then refer back to this information later on, if needed.
Having a defined work project will also help keep costs clear. So if your client starts to ask for things that weren’t outlined in the original scope, make sure you point this out straightaway. No client is likely to pay for a “surprise” invoice for additional work they didn’t know they were being billed for.
Depending on your client/ the type of work you’re doing, you may also feel it appropriate to ask for part of the payment upfront (known as “part payment terms”).
Step 2 - The Devil’s in the Detail
A favoured technique used by late paying clients is to query an invoice. Either they don’t understand the product, it’s not addressed to the right person, or a specific, crucial detail is missing. So make sure that everything is as clear and accurate as possible. Remember that your contact in the organisation isn’t necessarily the person that will be paying the invoice.
As for the content of the invoice, avoid generic descriptors such as “consulting” or “design”. Be as clear and specific as possible about everything you list. Also make sure you find out if your customer requires a PO (purchase order), and if so be sure to include it on your invoice.
Granted, you won’t be able to get all of this right all of the time. But by ensuring that your invoices are as accurate as possible, you will minimise the chances of late payment.
Step 3 - Early Bird Catches the Worm
Edward de Bono is famed for coining the concept of “lateral thinking”. He even went as far as to suggest that consuming more Marmite might help calm tensions in the Middle East. We don’t have anything quite as left-field as that, but we do have a few slightly more unusual ideas for taking on late payment.
For one, you can always offer a discount for early payment. Why not try offering a 15% discount if the invoice is paid within a week? Or maybe a reduced rate for their next purchase? But these examples only really work for invoices dealing with larger sums of money. Invoicing late paying customers on a weekly, rather than monthly, basis may also help to keep payments at the forefront of their mind.
But you know your customers best, so you’ll also know what is most likely to incentivise them.
Step 4 - Better to Light a Candle than Curse the Darkness
Late payment can sometimes feel a little overwhelming. Especially if you’re relatively new to the world of entrepreneurship, or you’re dealing with a much larger organisation.
But don’t despair! Never assume that a payment is lost.
The best thing you can do is to be proactive. There is nothing wrong with sending a reminder a few days before a payment is due, on the day itself, and if the money never arrives, a few days afterwards too.
You can also call your client for an update. Keep a steady stream of gentle reminders going, and keep a record of all contact you make chasing up your money.
Step 5 - You Catch More Flies with Honey than Vinegar
Late payment is as frustrating as it is annoying. After all, it’s really not right that you should have waste your time and money chasing a payment that is rightfully yours. Late payments are dangerous, and can have a serious impact on your business health. All confounded by the fact that NONE of this is your fault.
But always remember to keep your cool. This is, after all, a customer. Tiresome as a late payment is, you don’t want it to damage your company image or cost you any potential repeat business in the future.
Plus a smile and a cheery message might be the difference between getting paid and having to wait another week or two...
Step 6 - A Stitch in Time Saves Nine
Running your own business means that you’re constantly trying to cram 25 hours worth of work into the 24 you have available. And whilst all the above is useful, it’s also very time intensive.
For Bill Gates, automation “magnifies efficiency”, so what is needed here is a way to automate the whole process of having to deal with late payment. Which is where online invoicing software comes in! It’s a way of creating, sending and managing invoices, all with a few quick mouse clicks.
Zervant provides online invoicing software for over 70,000 entrepreneurs and small businesses. You can create and send invoices from anywhere, at any time, which makes getting paid a whole lot easier. See for yourself with a free 30 day trial!
Mi-IDEA Manchester Networking Event
27th Sep 2016
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