Waiting to be paid or chasing late payments has to be one of the most difficult aspects of working in the trade. When you run a contracting business, and you have electricians and plumbers to pay on a regular basis, not getting paid yourself can cause you real problems. It’s an issue that the Government has tried to focus on over the past few years to protect small to medium-sized businesses, however there are still issues with often larger organisations, and even the public sector, taking a long time to pay their suppliers. It’s not just other organisations either, chasing domestic customers can be just as problematic.
Here are our top tips to help you get paid on time:
1) Understand the Process
As frustrating as it may be, every business has a different process for receiving invoices and making payments. You might think your client is simply sitting on your invoice, however it could be that you’ve sent the invoice through the wrong channel or not containing the correct information, and trust us, they won’t chase you for the information, often they’ll wait for you to chase them! So, before you go in to business with a new client, make sure you fully understand the payment process to ensure you don’t cause yourself any unnecessary delays.
2) Consider Investing in Software
For domestic customers you might find investing in a job management software helps to speed up the payment process. Software like Okappy allows you to send an invoice to the client electronically whilst you’re still on the premises, not only encouraging them to pay there and then, but also giving them a more convenient and simple way to pay online, rather than digging out their cheque book.
3) Implement a Late Payment Fee
It may seem harsh and you may worry about it putting clients off working with you, however it is becoming more commonplace within the trade to change a late payment fee to encourage clients to pay you in a more timely fashion. If you’re unsure how much to charge or the rules around late payment charges, refer to The Late Payment of Commercial Debts Regulations which has all the information you need.
4) Keep Your Process Moving
When you’re busy, you often can’t find the time to invoice your clients, and so you end up doing it long after the job is complete. This could send a message to the client that you’re in no desperate rush so they may act accordingly. Try to send an invoice within days of the job being completed, as the quicker you submit your invoice, the quicker you get paid!
5) Communicate with Clients
Rather than simply sending a standard reminder email each week, why not pick up the phone and speak to your client. Don’t wait an extra week after payment is due, call their accounts department as soon as the payment becomes late, to highlight the problem, and so they’re aware that you’re awaiting payment. Where possible, try and build a rapport with the accounts department, so they see you as an extension of their business rather than simply a contractor chasing payment.
6) Shorten your Payment Terms
Consider shortening your payment terms to encourage clients to make a payment on time. The standard tends to be 30 days, however 14 days is still an acceptable amount of time. If you do decide to implement a change, ensure that your clients are made aware of the change, with a suitable amount of notice.
Receiving payments on time not only helps your business run more smoothly, but it makes sure there is considerably less stress for you as the business owner. Hopefully these tips will help you keep the cash flowing!
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