For all the wonderful positives that being self-employed brings, being paid late is one of the most disempowering and dispiriting things about being a business owner. Did you know that Small and Medium businesses in the UK are on average paid 20 days late each invoice? This is very common as sometimes it is just one of those months where the bills go out but the invoice payments don’t come in. This fact alone is why so many small businesses go under. It can be a vicious circle; one business’s late payment having a negative knock-on effect on all the other small and medium businesses it works with. Getting clients to pay you on time is a crucial part of securing strong and healthy cash flow for your business and here are some ways to help avoid the above situation in the future:
- Ask for a % of the bill paid upfront ahead of any service: Some businesses ask for 50% upfront and 50% on completion, if it is a one-off service some ask for 100% upfront. Find what works for your product/service and the sector that you operate in, if you do implement it ensure that you add it clearly into your T&Cs.
- Don’t wait for the end of the month to invoice: After a product has been bought or a service provided invoice immediately to avoid adding even more time between service and final payment.
- Have set payment terms set out in the contract: If you have an NDA or formal T&Cs that are signed by the customer ensure you make clear what your payment terms are, how many days the payment window is i.e. due on day of invoice, 7 days, 10 days, 30 days etc.
- Use invoicing software: By having some form of accounting software it is quick and easy to check who has paid, who needs chasing, send reminders and settle invoices. There are plenty of apps and programmes on the market from free software like Wave and FreeAgent to paid for services such as Xero, QuickBooks and Zoho.
- Don’t be afraid to chase: I admit that dealing with billing is my least favourite aspect of being a business owner, I don’t enjoy billing or chasing but it has to be done. Send a polite reminder the day before payment is due and then continue to do this until payment is made, also don’t be afraid to pick up the phone to chase. Failing that there is always the small claims court although I’m sure most businesses would want to avoid that.