I know you will agree that there is nothing worse than waiting around for an outstanding payment to be made. To find out how you can reduce the chance of late payments then continue reading below.
The delay of a payment is very frustrating, especially for small businesses.
What do I need to know?
We understand that businesses need and rely on regular cashflow to be able to pay for the rent, bills, electricity, and wages for staff of the business.
As a business owner you do not have the time to be chasing late payments, therefore you must put the correct measures in place to avoid the potential for late payments.
Why do I need to plan?
The first rule of running a business is to have a plan and regularly review it. This allows you to predict any potential scenarios that may arise, so you are as prepared as possible for all outcomes.
Even though you may not want to think about the worst-case scenarios for your business, this is very important as if your sales are down, you need to know that you have enough cashflow to be able to survive.
You should have a checklist to monitor risks of personnel changes, supply chain issues, natural disasters and technology failures so that the right precautions can be put into place.
Define your payment terms
Technology is a great resource for businesses to use to collect payments from their customers as it makes it clear exactly when and how much they should pay you.
If there is not a stated deadline for a payment, then it is assumed to be 30 days from the receipt of the invoice, after this time statutory risk can be charged.
Alternatively, if your business offers a free consultation before agreeing to work with the customer, this enables the opportunity to agree a fee and clarify when the client must pay.
You should always outline what interest you will charge the client if they do not pay their invoice on time.
What do I need to know about Invoices?
Invoices should be clear, accurate and quick, as this increases the chance of the customer paying on time. You should also make sure it is clearly and boldly displayed that the document is an invoice.
It is essential that all the relevant information should be available on the invoice including:
- Name of your business
- Business’s address and contact details
- Pre-agreed terms and conditions
- Reference number
- Customers name and address
- Clear description of service provided
- Date service was provided
- Date of invoice
- Amount charged
- VAT (if applicable)
Make sure that you keep invoices for six years just in case HMRC visit questioning your record-keeping capability.
Making Tax Digital
Making Tax Digital (MTD) is a government scheme that has been introduced to improve the collection of tax for the Treasury, improve business record keeping and enables the business process to run more smoothly.
Using online software technology to invoice your customers means that payments can be made from smartphones straight away, so there is no backwards and forwards.
This will allow you to support more customers in less time, as you can track your money and monitor the businesses cash flow from anywhere with an internet connection.
You might be worried about the security of using online software to make and collect payments, but it is safer than ever.
‘The Cloud’ is a secure system for all data and storage, which is accessible online. So, there is no need to store files on your computer or use a USB stick.
The Cloud’s main benefit is that it reduces the risk of accidentally deleting files or hacking.
Make sure that you offer your clients a consultation to agree the price of the service and the terms and conditions of the payment. Additionally, you should ensure that invoices are clear and accurate and have a contingency plan in place to deal with potential late payments.
You can download the full guide here –
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