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Late payments can seriously disrupt your business’s ability to compete and ultimately survive in your marketplace. Over time, they compromise working capital to such an extent that you cannot operate effectively day-to-day.
There are steps you can take to reduce the likelihood of payment delays, however, and considerably improve your cash flow. Proactively anticipating common payment problems, and putting in place systems to deal with them, is the best way to protect your business from late payers.
Before taking on a new customer or client it’s important to check their credit history as this will flag up any problems that could negatively impact your business. If issues are evident it doesn’t mean you have to reject their business, however.
Making checks simply gives you some control over how they pay – you may decide to request immediate payment, for example, or a higher deposit before commencing work. You could also start by granting a low credit limit and review it as time goes on.
Making ongoing checks on the creditworthiness of your existing customers is also effective in protecting your business from late payments.
Invoicing straight away is another proactive way to minimise the number of late payments. You could also check with customers that there are no issues with the product or service you’ve delivered before you email their invoice.
Including a link to pay electronically makes it easy for them to pay when they receive the email, and with a wide range of invoicing/accounting software available, reminders and notifications that payments are late can alert you to follow-up.
Invoice factoring protects your business from late payment and removes the constant time drain of chasing customers. You can choose single invoices to factor – a process called spot factoring – or if your entire sales ledger holds value, every invoice you generate could potentially be used to improve cash flow.
The factoring company also takes over the management of your credit control function, which frees up valuable time to focus on other income-generating areas. A typical factoring arrangement allows you to receive around 90 per cent of your invoices within 24-48 hours, with the remainder being released when your customer pays.
Customer queries on invoices can severely slow down incoming payments so being clear on your terms and conditions is vital. These include the number of days you allow a customer to pay, and the amount of interest and fee levels you’ll charge if they don’t pay on time.
Putting in place a clear credit management policy also makes it easier for your staff to carry out credit control tasks and chase payments confident that they can point the customer towards written terms and conditions if necessary.
UK Business Finance can help you protect your business from the devastating effects of late payment and ensure you always have the working capital to operate optimally. We work with alternative financiers around the UK and provide our services free of charge to you.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
What are my options if I need business finance urgently?
Regardless of how closely you monitor your company’s cash flow, the nature of business means you may still need finance urgently at some point.
What is equity finance?
Equity finance is a business funding option that involves selling shares in return for investment. It’s commonly used by start-ups or early-stage company directors wishing to get their businesses off the ground and propelled towards rapid growth.
Hard asset finance v Soft asset finance
Hard asset finance and soft asset finance both offer flexible ways to purchase business assets. Whether you need a new piece of machinery to increase output or state of the art IT equipment, these types of asset finance options are invaluable in buying them affordably.
Regulated v Unregulated bridging loans – what’s the difference?
Bridging loans are finance facilities that help consumers and businesses to complete property transactions when a financial ‘gap’ needs to be bridged. Examples include a consumer purchasing a new home to live in and a business investing in commercial property.