Easy steps to getting paid
SME’s could be faced with two viruses this year. The coronavirus, but also the long running pandemic of all SME’s life is late payments of invoices and reducing cashflow.
Therefore, we have come up with some quick tips to ensure you are on the case to seeing those invoices paid on time.
- Check your sales ledger
This maybe time-consuming to begin with, especially if you have not done this for a while. Nevertheless, by spending 10 minutes a day to see who owes you money or are due to make payment over the next few days.
- Call your customers
Maintaining a personal and business relationship with your customers is key in any business and this applies equally when calling them for payments which are due to you.
A 5-minute conversation is more proactive than an email. Explain the reason for your call, listen to what the customer says and aim to reach an agreement about when and how the payment will be made.
- Is your invoice clear?
- Make it stand out by using your company branding
- Make sure it contains the word ‘Invoice’
- Add a unique sequential number to make it easy to track
- List your company name, address and date
- Summarise each product/service provided and the date
- Include the name and address of the customer
- Add a payment due date
- Include bank details
- Provide a contact number and email for any queries
- Send out invoices within 24 hours of providing the services/goods and schedule polite payment reminders
And, don’t forget if you are VAT registered you need to include your VAT number.
- Keep an eye on your existing clients
Carry out your own ‘due diligence’ This is where you ensure your clients have been credit-checked, and that they are not posing a risk to your business for owing more that their credit limit is listed for.
During this unstable time, it maybe an idea to also review this on a more regular basis, especially if you are receiving larger orders from your clients than would normally be the case. It could be that they have no credit with other suppliers.
- Due Diligence for ALL new customers
You may find you have an influx of new customers. This can be good, yet it could also be a big issue to your business if you do not do a thorough review and undertake due diligence on these new potentials.
They may want to start trading with you honourably, however whilst the economy will be stretched, they maybe seeking someone to afford them credit to keep their business trading. You need to ensure the survival of your business and remember you are not a charity and have your own overheads to pay.
- What to do if non-payment is persistent.
- Have you actually sent the invoice?
- Have you called the customer for payment?
- Have you sent reminders as part of your collection process?
- Have you issued a final demand?
- If your debtor is a business, then issue a ‘letter before action’ including the late payment of commercial debts (interest) Act 1998 & regulations 2002.
- If your debtor is an individual, you must adhere to the PAP (pre action protocol)
- Do not be afraid to take action – Issue a MCOL (money Claim online) https://www.moneyclaim.gov.uk. There is step by step guidance to help you. Alternatively ask an expert for assistance.
Now is a great time to speak to your customers during this uncertain period. Reach out and see what ‘temporary’ arrangements you can make with them to ensure you get paid.
This may be in the form of offering a discount if they can pay you early?
This can assist your cashflow at this time, but this is something you should not do without some thought. Review your cashflow forecast on a week by week basis and ensure that you can cover all your liabilities and outgoings first.
Secondly, speak with your suppliers, find out what their situation is, see if they will offer you a similar facility. Perhaps this might be an opportunity to reward customer/supplier loyalty through some mutual leeway on arrangements, including payment. If this is something you can facilitate within your cashflow forecast, then don’t delay; be pro-active.
- Get expert advice
When did you last MOT your credit control processes and your cash flow management?
This is crucial to any business trading on credit, and without having robust processes and policies, the ability to track your cashflow and keep on top of your cash in flows and out flows, as well as profits will be hard to review. More importantly its about being on top of your recoveries and having the right protocol within your business to safeguard it from failure through lack of cash flow and loss of customers and supply chain.
Also, look at your cash inflows and outflows to see what leverage you might have to minimise financial impact on your business.
Pecunia offers a free 1 hour ‘health check’ for your company’s credit management procedures ranging from applications for a credit account through to risk assessment and cash collection. Feel free to contact Tracey on firstname.lastname@example.org for more details. Alternatively contact us through our website www.pecunia2016.co.uk
Tracey Westell FCICM
Director Pecunia 2016 Ltd