Prompt payment helps healthy finances

By Sara Beaumont, partner, WHN Solicitors.

Late payment of invoices is a common cause of cashflow difficulties. Here are some effective ways of getting your cash in more efficiently.

Strike up a strong relationship

Knowing your customers is crucial to getting your bills paid in full and on time.Research new customers before carrying out work. Companies House and Experian provide helpful reports on businesses’ financially stability. If red flags are raised, ask yourself whether you are prepared to risk a bad debt.

Also, get to know customers as individuals. A customer is more likely to pay on time, or respond positively to a polite reminder if there is a solid relationship.Be clear and prompt over billing

Agree a quote before you start work and stick to the price agreed. Any extra, unforeseen costs should be approved by the customer before sending your bill.

Format your invoices so they are easy to read – and make it clear when payment is due. This helps avoid misunderstandings and delays.

Flexibility encourages prompt payment.

Another way of encouraging prompt payment is to offer customers different options, such as PayPal, electronic transfer, credit or debit card payments.An effective incentive is offering a discount for prompt payment.

Pick up the phone

Follow up an invoice with a phone call to remind your customer a couple of days before payment is due. Good customers don’t mind being asked. Just the opposite: your eagerness to politely chase payment shows you are on top of your finances, which any good customer should respect.