Over £23 billion worth of late invoices are owed to businesses across the country, and for a small business, a missed payment or two can spell financial disaster in very little time. While you may hope to attract a better class of customer who would never try to snub your requests for payments, there is more than one reason for a missed payment. Whether your customer is simply busy, you’ve failed to provide them with the correct payment details, or a mixture of the two, there are several things you can do to ensure the prospect of a missed payment becomes a thing of the past.
Strengthen your payment system
Rather than your customers' tardiness, it may be the payment system or process you use to chase payments that is your undoing. When you issue an invoice make sure you have included all the information your customer will need to pay you. This includes:
Your business name and address
The company name and address of your customer
An invoice number for easy identification
A clear and accurate description of what you are charging them for
The total amount payable (including a breakdown of any discounts or extras)
Bank account and sort code (or IBAN, BIC or SWIFT codes for international customers)
The date by which it should be paid/late payment fees
This should all be included as standard, but to further guard against a missed payment, you should check if your customer requires extra information such as:
The name of their main contact
You should aim to always use a PO number, as this gives legal weight to your contracts.
Use a payment system that makes sense
A bank transfer might be easiest for you, but if that causes issues for your customer, then it’s not the best solution. Bank transfers are also open to error – one mistyped number and your payment is delayed by another few days. An automated payment system can solve this issue. Online payment systems can issue invoices that can be paid in a click, meaning that your customer can go from opening your invoice email to paying it in just a couple of minutes – no scrambling about for the card reader needed. This is also ideal for a recurring payment, wherein your customer only has to pay once to have their details securely stored for future payments via direct debit.
Keep on top of your payments
It’s one thing to expect your customers to pay on time, but it is essentially down for you to know what “on time” means. Keep a close eye on what you are owed and the date at which outstanding invoices become missed payments. Online payment systems can be an excellent solution here, keeping a perfectly curated overview of each of your accounts and their finances.
A monthly payment calculator is also useful if you need to make payment. For example, if you have taken out a business loan. You can find a business loan monthly payment calculator online to help you understand what you are still due to pay back. Of course, if you are currently repaying a loan, that makes it more important than ever to stay on top of any missed payment.
Chase them down
There’s no room for shyness when it comes to keeping your cash flow healthy. If someone owes you money, chase them up. This is, sadly, very much part and parcel of most business’s daily routines and you’d be very unfortunate to find a customer who took it personally. You should first send a gentle reminder as an email, then a call, then a final reminder. Again, an online payment system can send automated reminders to make this easier.
What if customers still refuse to make a missed payment?
If your customer has ignored repeated attempts to chase payment, then you may need to consider legal action. There are several things to consider before going this route, including your long-standing relationship with the customer. In some cases, businesses have been forced to accept a missed payment if they are dependent on a customer for continued business in the future.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.
GoCardless is used by over 55,000 businesses around the world. Learn more about how you can improve payment processing at your business today.