Guide

Ensure customers pay you on time

Tips to ensure customers pay you on time

To reduce the chances of late or non-payment, you could:

  • Make credit terms and conditions clear.
  • State an intention to impose your rights under the late payment legislation in all contracts and invoices eg "We 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."
  • Don't supply any goods or services until you are satisfied with the credit checks.
  • Quickly issue invoices that are clear and accurate. Include only useful information eg order number, payment terms, due date, delivery date and method, unit cost and total payable etc. Email invoices or use first class post. You should reference the late payment legislation and the additional costs of paying beyond the agreed date.
  • Use a computerised credit management system, which will help you keep track of customers' accounts and generate reminders when payments are late.
  • Have a collection strategy eg telephone ahead of due dates to check that payment is in progress, or send reminder letters. Send emails/faxes if your telephone calls are being diverted or letters being ignored. If necessary, organise visits from sales staff and/or direct payment requests to more senior staff than normal.
  • Set monthly targets - put together a payment timetable and ensure that you have staff who can devote their time to collection.
  • Use an electronic payment tool.
  • Ensure your staff are properly trained in credit management and debt recovery.

You could also take out:

  • credit insurance - to cover you if you have a bad debt due to a customer going into insolvency
  • legal expenses insurance - this covers the costs of recovering debts through the courts

To improve cashflow, you could also use a debt factoring service. This is where you effectively 'sell' your invoices to another company - seeĀ factoring and invoice discounting.

Part of My New Business
Start your business checklist Show all