How to manage payment of your accounts

Written by admin on April 9th, 2011

It is a truism, but there is no point delivering goods or a service unless you are going to get paid for what you do. Nobody works for nothing and if your business is to survive its first couple of years you need to get your cash in, and get it in quickly. Cash is King.

Late payment of invoices are unfortunately inevitable, especially in the market we are in at the moment. But there are a number if things that you can do to make sure you get paid on time.

Charge Interest on late payments

The Late Payment of Commercial Debts (Interest) Act 1998, enshrined a right for small businesses to initially charge large business, interest on late settlement of invoices. It is now extended so any business has the right to raise interest against any other business for late payment.

Your invoice should state when it becomes due and so any time after that date you can charge interest at the rate of base plus 8%. How effective this solution may be to you will depend on your relationship with your clients, and whether you are afraid of upsetting any relationship.

Call and chase payments

If your account is not settled on time, do not afraid to call and chase. The earlier you establish contact the higher priority you will become for the debtor.

Follow up calls with a chasing letter/statement

Make sure that a further letter chasing the account is sent, or a statement of account. This should usually be sent after 45 days.  

Make your invoices clear

Set out all your contact details, VAT details, payment terms and precisely set out what it is that you have delivered, so that any queries can be easily identified and separated out.

Keep on top of accounts

Where you are delivering multiple invoices to a number of clients each month, make sure that you always know what is due and what is not. It is very easy to allow credit to build up to the extent that it likely to caused a problem. Small amounts can very quickly mount up to bigger sums and if your client is struggling the first that you may know about it may be too late for you.

Don’t be afraid to escalate your concerns over non payment

If you are not getting paid, speak to the main controllers of the business. By pass accounts and get to the Finance Director or Managing Director and let them know that you intend to get paid, and on time. Keep a record of all attempts you make to get payment as these may be necessary if you unfortunately have to resort to the law to recover your money.

Consider a cashflow finance alternative

Factoring and Invoice Discounting are useful tools for generating cash from your invoices without the hassle and time consuming effort inn getting paid each month. Instead you can outsource the process in return for a small fee.

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