Keep your late payments under control | Eazipay Direct Debit News
 

 

Keep your late payments under control

August 9, 2011

The latest statistics from the Banks Automated Clearing System (Bacs) on late payments make harrowing reading for UK SMEs.

The figures, which were released in May, show that altogether around £24 billion is owed to SMEs, with large corporates being amongst the worst offenders.

The survey goes on to say that payments are sometimes delayed by 52 days and that 158 million working hours are lost to chasing overdue bills with the average debt amounting to £27,000.

These are substantial numbers, so how can SMEs protect themselves from the worst excesses of late payment?

Luisa Grey a Director of leading Direct Debit processing company, Eazipay Ltd, has some ideas on how to combat this growing problem.

Good cash flow is essential to the success of any business and at the moment it's even more critical.

Whilst it's tempting not to upset good customers by chasing bills, late payers can, and have, forced profitable SMEs to the wall. Overdue payments, therefore, can no longer be ignored.

The process of ensuring accounts are settled on time starts a long while before the first invoice is raised and like most things it operates better if there's a solid, workable system in place.

All new customers, no matter how substantial they appear, should be subjected to a thorough credit check. If whole countries can be in danger of defaulting on their loans, there's no reason why some of the biggest companies couldn’t share the same fate. Before you start supplying anything make sure you get an up-to-date status report, which outlines recent business performance.

It's also perfectly acceptable not to give a new client any credit until they have proved themselves to be good payers.

As soon as an order comes through, confirm it in writing. Make sure the order has a number, that the value of the order is agreed and that it's given an invoice number. Let the client know what that is and make sure that the payment terms are clearly stated and don't allow any room for manoeuvre. Offering a prompt payment discount as an incentive could also be worth considering.

All the above will help reduce the risk of queries, genuine or otherwise, further down the line.

Once the order has been completed, it is obviously good business practice to get the invoice in promptly, but don't then forget about it until the money is due. Make contact a week later to confirm that the invoice has been received, that the figures are correct and that it has been logged onto the system. All this helps to avoid the well-known excuse that the client never received the invoice.

Printing the invoice on coloured paper also helps to make it stand out.

Sending out a statement about halfway between the invoice date and the due date is also a worthwhile exercise. This further reinforces the point that the invoice is due and that the accounts department is on top of things.

And try and keep it personal at all times. Make a friend in the accounts department so that the company has a human touch rather than simply being a number. Equally, if the accounts department isn't being terribly forthcoming, consider speaking to some of the other contacts in the client's offices instead.

Theoretically, all the above should ensure that payments are made on time but sometimes, despite the accounts department's best efforts, payments won't be forthcoming.

There are, however, a number of processes to handle that too.

Firstly, begin the chasing process immediately the payment is overdue. At this stage, it's a gentle phone call to confirm that payment is on the way. Send out a reminder the next day which is a polite request for payment.

If necessary, send out a second, slightly stronger letter seven days later and seven days after that post a letter threatening legal action if payment isn't received in the next week.  And at this point, if monies still haven't been received, the account should be on stop so.

From the second letter onwards, it's perfectly reasonable to request interest on the outstanding monies, too.

As mentioned before, this can be a tricky process to follow if the relationship is strong and the orders are regular. As a result, before getting too aggressive, it's always worth trying to negotiate first. An amicable arrangement, where perhaps the outstanding balance is paid back over a period of months and the client remains a client, is potentially a much better ending than County Court Judgements and a lost client.

Having said that, another skill worth developing is to know when to stop trying to resolve the issue and resort to legal proceedings instead.

No matter how good the relationship, there comes a point where being sociable won't pay the bills and tough action is required.

One of the very best ways to avoid late payment is to insist on all invoices being paid by Direct Debit.

Direct Debit has several advantages; not least that it makes cash flow much more reliable. If a payment is missed, the problem is flagged up immediately and action can be taken straight away. It's easy to find out the cause of the problem, rather than having to wade through weeks of correspondence.

The cheques in the post excuse is also a thing of the past.

Direct Debit also saves time and money. Less time is spent handling cash and cheques and staff that were focused on chasing payments can now spend more of their time doing things to help the company grow.

Late payments can be a particular problem during the holiday season. ˜The person who writes the cheques is away is a classic excuse. Direct Debit can obviously help with that too, but there are other ways to avoid the holiday non-payment blues.

Make sure that staff know who else they can talk to if their usual contact is away. It's also important that they have access to all the information they need to chase bills effectively. Your accounts department shouldn't grind to a halt because one person is away, so ensure that key files are still accessible and all post is opened.

And one final thought late payment goes both ways. Ensuring your own invoices are paid on time will help maintain a good reputation.

Luisa Grey is a director of Eazipay Ltd, one of the UKs fastest growing Direct Debit processing companies. The company provides regular Direct Debit services to over 650 companies in a wide range of market sectors throughout the UK, Europe and beyond. For more information visit www.eazipay.co.uk

Top ten tips on how to avoid and deal with late payments

1)     Carry out a credit check on any new customer

  • 2)    Make sure the paper trail is accurate and complete, right from the start
  • 3)    Send out a invoice as soon as the work is complete
  • 4)    Contact the client a week after the invoice has been sent to ensure it has arrived
  • 5)    Send out a statement midway between the invoice date and the due date
  • 6)    Make friends with the clients accounts department
  • 7)     Send out a reminder immediately the invoice is overdue
  • 8)    Chase regularly
  • 9)    Always try to negotiate rather than going down the legal route
  • 10)  Make late payments a thing of the past by:
  •  
    1. Insisting that all new accounts pay by Direct Debit
    2. Converting (over time) all existing accounts to Direct Debits
    3. Introducing a surcharge for all customers who continue to pay by cheque

 

NOTES TO EDITORS

About Eazipay Ltd

 

  • Established in 2002 by local entrepreneurs Kathy and Ron Bradney, and their colleague, Luisa Grey, Eazipay Ltd has become one of the UKs fastest growing Direct Debit processing companies.
  • Eazipay now provides regular Direct Debit services to over 650 companies in a wide range of market sectors throughout the UK, Europe and beyond.
  • In March 2011, Eazipay recorded its best ever month for Direct Debit collections when £9.8 million worth of Direct Debits were processed on behalf of its clients.
  • Eazipay was recently awarded Affiliate status from Bacs, the governing body for Direct Debit processing in the UK payments industry. The company is now a member of an exclusive group of 38 other Bacs Affiliates, which includes representatives from some of the UKs leading businesses, banks and building societies, as well as government organisations and banking technology providers.

For further press information, please contact:

Damion Clark at Real PR (Consultants) LLP.

Tel: 07789 911314

Email: damion@realpublicrelations.com

 

Eazipay Limited are authorised and regulated by the Financial Conduct Authority, number 615816 under the Payment Services Regulations 2009 for the provision of payment services. www.fca.org.uk
The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk

© eazipay 2015 | sitemap

site by prussian blue + tIMC