A great business destroyed by avoidable late payments. It happens all the time. You have a great product, you’re selling it well, the unit economics all make for sustainable growth and profit; and yet you find yourself in danger because you can’t meet immediate credit commitments. All whilst a customer is sitting on their hands instead of paying what they owe.
I sometimes daydream about turning the tables, walking into one of the worst late-payment offender’s high street stores, picking up some goods and walking straight out of the door with a promise to pay them in 60 days – knowing all the while I’ll actually pay closer to 70 days, or maybe 80 days, or 90 days… whatever suits me.
In real life it probably wouldn’t go down so well.
The frequency of late payment is as depressing as it distressing. Next month we’ll be releasing the results of an in-depth study into all these invoices, picking out the worst offender and praising those that pay on time. But we shouldn’t forget that the supplier can have a big impact getting paid promptly by doing a few simple things well.
Five ways to get paid on time:
1 – Invoice on time: seems pretty obvious doesn’t it? But too many businesses fail to send the invoice straight away. I’ve received invoices from suppliers for work done months ago; this kind of practice suggests you don’t care when you get paid, and if you don’t care, I definitely don’t. Invoice on time and make sure your contact has received it.
2 – Invoice accurately: if you make mistakes on your invoices (dates, missing info, incorrect numbers etc.) you’re giving your customers an excuse to pay late. Taking a little care to check and double check outgoing invoices is time well spent. Also make sure the due date is super clear on the invoice itself!
3 – Be flexible on payment methods. It could be well worth accepting credit and debit card payments, as well as all the traditional payment methods. Again, state all this clearly on your invoices. Sometimes, especially with new customers, you’ll find that offering different payment methods can have a dramatic effect on when you get paid.
4 – Know your customer. If you’re dealing with larger end customers, you’ll often find you need relationships with two completely different departments in their business – first with whichever department your work is relevant to, and second with their accounts payable. Most small businesses are great at keeping that first relationship in good condition, but terrible with the accounts department. Get to know and understand how your customers’ accounts departments work – when do they make payments? Who is in charge of actually making the payments? How best can I contact them? Knowing the answers to these questions could save your business.
5 – Your outstanding invoice is an asset – use it! Outstanding invoices have value and you can use them to secure funding today, rather than waiting for payment. Traditional invoice finance would have you put up your entire ledger for a giant credit line and you’d be tied into a long contract. You don’t need to go through all that anymore. You can get finance in 24 hours against an individual invoice with no long contracts or hidden fees.
Late payment is a silent killer of otherwise great businesses. Be on your guard against it and give yourself the best possible chance of being paid on time.
By Paul Crayston, Head of Communications, MarketInvoice