According to Bacs (the company which runs Direct Debit in the UK), 52% of SMEs in the UK are owed monies from late payments. The average late payment debt now stands at £32,185, which equates to £26.3 billion.
45% of SMEs experience payment delays of up 3 months and it is estimated that small firms waste up to 16 weeks per annum chasing invoices, time which could have been invested elsewhere, and ultimately has a knock-on effect on business growth and profitability.
How can you reel in the late payers? And when should you seek legal advice?
Here are VWV’s top tips to help you to reduce debt and improve your payment terms:
- Good communication is key
Build good working relationships with your customers and keep in mind that the best time to negotiate for better terms is when you don’t have an urgent need for them.
- Send invoices promptly
Send out all invoices promptly and make customers aware of the consequences of not paying on time.
- What are your payment terms ?
Make your payment terms clear, or add a payment due by date in your communications. Do your terms include interest on late payments ? Think about including a legal expenses clause to recover solicitors’ fees if they are instructed to recover outstanding invoices.
- Ensure customer information is kept up to date
Make sure all customer information is up to date so they can be contacted easily and, if relevant, do credit checks on them. There are various credit check companies and whilst there is an initial cost, this could save you thousands in the long term.
- Record as much contact information as you can
The more contact information you can get, the easier it will be to contact the right person and recover the money owed to you, especially if outsourced to a debt recovery law firm.
- Record due payments and send reminders
Make sure you record when payments are due and send reminders a couple of days prior to this date. A quick, timely email may be sufficient to remind a customers that its payment is due.
- Make sure you know who to contact
When you are dealing with debt, find out who is responsible for dealing with a customer’s accounts and reach out directly to that person. Always keep contact details for other personnel in case the person you have been dealing with is off on annual leave, sick or has moved on.
- Be prepared to outsource debt recovery
If payment is still not received after a period of time, or if the customer refuses to cooperate, instruct a debt recovery law firm. Introducing a recognised professional firm will demonstrate your intent to pursue the debt. They are well placed to escalate matters, including preparing letters before action, obtaining pre sue reports and taking further legal action if necessary, to help you retrieve debt owed to you.
VWV is an award-winning law firm with offices in London, Watford, Bristol and Birmingham, who helps businesses recover debts quickly. In addition to its innovative debt recovery portal, providing real time updates, VWV’s work is largely done on a ‘no collection – no fee’ basis, designed to save businesses time and money from the outset.