Getting paid on time and getting it right – easier said than done…
Firstly the vast majority of self employed individuals and businesses often face a delay in getting paid. From a financial perspective cash is king in the short, medium and long term. Therefore weak credit control will lead to a lack of sustainability.
Read on for more tips on how to get paid on time.
Delays in getting paid affects most people in business. Likewise it is not prioritised as much as it should be. If you don’t get paid on time, you may have to resort to borrowing money to keep afloat. Whether you can continue to maintain this is a separate issue. Get yours right!
Most importantly, there are two stages you must use when it comes to managing credit control. If you decide to allow of credit facilities then manage this robustly. In other words remember that allowing credit always carries an element of risk i.e. not receiving your cash. Credit control is about managing that risk.
Assess customers to see if they are credit worthy. Likewise do not forget the size and status of the client does not determine their credit worthiness. Don’t forget large companies are just as likely to default on paying as small ones.
Credit checks’
- Check trade and bank references
- Look up Companies House information
- Check County court register
- Not forgetting first impressions and credit agencies
Similarly the internet is a useful tool in credit scoring giving you access to a large amount of relevant information and credit ratings.
Payment terms
In addition a written agreement should be drawn up stating the terms and conditions of payment. List things such as:
- Number of days to pay
- Interest charged on late payments
- Legal title to goods not passing to the client until full payment is received etc.
- Title is important if you ever go down the legal recovery route.
If payment is not received by the due date there are a series of steps you can go through:
You may choose to send a reminder first. Following this you may call them- this is quite effective. Depending on the time you wait for settlement will decide next steps. You could start on a “friendly” note then move on to potential court action. If it gets to the court stage your client relationships will have deteriorated. Court actions can be instigated on-line and are very efficient.
Utilise technology
Technology can also play an important part in credit control. Such as issuing invoices via e-mail, setting up time alerts (Microsoft Outlook), and the production of credit reports. Technology helps keep track of outstanding invoices and also days outstanding. Electronic delivery methods will quicken the collection processes, provide confirmation that the invoice was sent, and save money on paper and postage.
Get in touch with us to find out more about getting paid on time and how to get it right. For more business and finance , news, advice and tips, don’t forget to watch our weekly broadcasts, listen to our weekly podcast I Hate Numbers.
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