Is your small business owed money from late payments? You’re not alone.
British small businesses write off a combined £9 billion in unpaid invoices every year, a survey conducted by Cloud accounting software provider FreeAgent has found.
Freelancers and micro businesses are forced to lose, on average, around £1800 in unpaid invoices each year, which is a significant amount of money for businesses that typically struggle to break even.
More than half of British small businesses get paid late
Research by Zurich earlier this year sheds more light on this problematic issue.
This survey found that 53% of small businesses are owed money from late payments, and 41% believe that late payments are having a significant effect on their cashflow. It’s also estimated that more than £250 billion is owed to British small businesses.
Even more shockingly, nearly 10% of SMEs are owed more than £100,000 – the sort of debt that companies of this size simply can’t manage.
Tips on avoiding late payments
To avoid late payments stacking up, try to do the following:
- Check out your customers – check their name, business and legal history to ensure they’re legitimate, and where possible, get a reference from another supplier
- Create clear payment terms – define your credit policy in unambiguous terms. Better still, try to obtain written agreement of those terms
- Make sure invoices are correct and simple – it’s vital that you don’t give customers any excuse to delay payments. So keep invoices simple, ensuring the due date, total due, payment details and order number are all prominent
- Keep your debt list organised – once an invoice is sent, it’s important that you keep on top of your customer should they be slow to pay. It makes sense to use some simple software to help you manage this process, and often this can be free. Try Wave, or a free trial with Xero
- Know your rights – some legislation exists to protect businesses from late payment. You may be entitled to debt collection or legal support, so familiarise yourself with what’s available. Once you know where you stand, you can start the process of claiming an outstanding debt here
With late payments escalating all over the UK, it’s worth getting your payment collection processes in shape.
