Encouraging prompt payment

By LBV

26 Feb 2010

Q: I have too many overdue invoices and am spending too much time chasing them. I know that cash flow is king, but how do I get people to pay promptly?

A: I find that businesses are experiencing the late payment of their sales invoices more and more regularly. Customers always seem to blame the credit crunch and the economic slowdown.

There are numerous ways in which you can speed up the receipt of cash coming into your business from those who are late or slow at paying you. I do find that different business sectors will have differing experiences, in general the following should speed the process up:

Early settlement discount
More and more companies are starting to offer a discount of between five and 10%, as long as payment is received within say 14 days, the discount will apply. This mechanism should not affect your turnover value as you should increase you original selling price to compensate.

Statutory late payment interest and/or surcharge
The use of the statutory late payment interest can be applied to any late invoices, that have been outstanding past the due date of payment. This is calculated at 8% above the Bank of England base rate and is prorated.

Outsource your credit control
There are numerous credit control businesses sprouting up, these work on your behalf and chase those invoices that are late, allowing you to concentrate on your day to day work.

These credit control businesses either work on an hourly rate or per invoice chased.

Ask for payment up front or on delivery
Dependent upon your industry, you may already employ this idea. For example, supermarkets, shops, insurance and the motor industry already use this system and very rarely experience any late settlements.

The standard business however may be reluctant to change their current method of invoicing, to adopt this.

Standing order / Direct Debit originator
It may be possible to work out a fixed fee for the year and apply a standing order system, this would ease the cash flow for both parties.

If your business is large enough it may be an idea to become a Direct Debit originator. Subject to the rules of Direct Debit you are able to control the amounts of money that are deducted from your customers’ bank account. The set up cost of this is in the region of £4,000.

Legal action
As a last resort it is possible to take your worst customers to court. It is best to take advice from your accountant or solicitor, in these circumstances.

Stop working for late paying customers until they pay
If a customer is unable to pay on time, they may be unable to pay at all, thus it makes sense to STOP work on any further work relating to the particular customer.

Once the debt has been settled or an agreement has been reached, work should be commenced if you are happy to do so.

Keep in touch with your customers
By keeping in touch with your customers through the use of monthly statements. It is a constant reminder of the amount of money that they owe to you and should always be top of their list of payments to make.

Alex Bell, Studholme Bell Chartered Accountants.
 

Enjoyed this? Read more from LBV

Latest news

1

Fulfilmentcrowd makes double senior hires Katie Shepherd L And Rachel Miller R

Fulfilmentcrowd makes double senior hires

19 Apr 2024

2

Forbes makes Manchester move Forbes Manchester

Forbes makes Manchester move

15 Apr 2024

3

Blackpool approves plans for pair of apartment complexes New South Promenade Apartments Visuals

Blackpool approves plans for pair of apartment complexes

12 Apr 2024

4

Distinguished engineer takes senior role at Lancaster University Rebecca Lingwood

Distinguished engineer takes senior role at Lancaster University

11 Apr 2024

5

International building supplies firm to open new plant in Preston New Kerakoll Group Premises Visuals

International building supplies firm to open new plant in Preston

11 Apr 2024

Hwc 2024 Email Signature 980x120
Background image for hub sign up block

LBV Hub

Reach 50,000 members of the Lancashire business community

Post your news
Post your events
Post your offers
Company profile
Social reach
Magazine coverage
Sign-up
Events
Health and Wellbeing Conference 2024
Hwc 2024 Social Media 1200px 1
Networking
23 Apr 2024

Health and Wellbeing Conference 2024

Crow Wood Hotel, Burnley , BB12 0RT

08:30 - 13:00

Help to Grow Management Course
HTG2.png.png
LBV Hub Seminars
15 Apr 2024 - 17 Jul 2024

Help to Grow Management Course

Preston Campus , Preston , PR1 2HE

09:30 - 14:00

HR Complete Training Programme: Equality and Diversity
Picture1.png.png
LBV Hub Webinar
23 Apr 2024

HR Complete Training Programme: Equality and Diversity

Online (Zoom)

09:30 - 11:00

Business Networking in Blackburn - BNI Vista
EVENT LISTING SIZING Vista.png.png
LBV Hub Networking
23 Apr 2024

Business Networking in Blackburn - BNI Vista

Hampton by Hilton, 2 Frontier Ave, Blackburn, BB1 3AL

06:45 - 08:30

Emergency First Aid at Work
Chamber Logo1.png.png
LBV Hub Seminars
23 Apr 2024

Emergency First Aid at Work

FGH Training, 3rd Floor, Storey House, White Cross Business Park, Lancaster, LA1 4XQ

09:00 - 16:00

Business Networking in Chorley - BNI Endeavour
EVENT LISTING SIZING Endeavour.png.png
LBV Hub Networking
23 Apr 2024

Business Networking in Chorley - BNI Endeavour

Oak Royal, Bury Lane, Chorley, PR6 8SW

06:30 - 08:30

Your Business Bootcamp Bitesize: "Roger That… The Importance of Asking Twice"
CBP-logo LBV.png.png
LBV Hub Webinar
24 Apr 2024 - 24 Apr 2024

Your Business Bootcamp Bitesize: "Roger That… The Importance of Asking Twice"

Online, Online, Online

08:00 - 09:30

Business Networking in Accrington - BNI Zeus
EVENT LISTING SIZING Zeus.png.png
LBV Hub Networking
24 Apr 2024

Business Networking in Accrington - BNI Zeus

The Mill House, Corn Mill Yard, Accrington, BB5 5HX

06:45 - 08:30

Chamber Breakfast Networking
Chamber Logo1.png.png
LBV Hub Networking
24 Apr 2024

Chamber Breakfast Networking

Lancaster & Morecambe College, Lancaster, LA1 2TZ

08:00 - 10:00

30 Minutes: Net Zero Introduction for Blackpool Businesses - Free online event
BU 2024 Events.jpg.jpg
LBV Hub Webinar
24 Apr 2024 - 24 Apr 2024

30 Minutes: Net Zero Introduction for Blackpool Businesses - Free online event

Online, Blackpool , FY4 1EW

10:00 - 10:30

Business Networking in Lancaster - Eden Business Network
EVENT LISTING Eden Business Network.png.png
LBV Hub Networking
24 Apr 2024

Business Networking in Lancaster - Eden Business Network

The Borough, 3 Dalton Square, Lancaster, LA1 1PP

18:30 - 20:30

Business Networking in Preston - BNI Diamond
EVENT LISTING BNI Diamond.png.png
LBV Hub Networking
24 Apr 2024

Business Networking in Preston - BNI Diamond

The Marriot Hotel, Garstang Road, Broughton, PR3 5JB

07:15 - 09:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more Lbv115 Online Graphic
Subscribe now

Weekly news bulletin