Carrying the weight of unpaid invoices can make doing business challenging. The coronavirus pandemic has caused financial difficulties for many and could be making the problem of late payments worse for both small businesses, the self-employed and freelancers.
The Forum of Private Business indicates that 1 in 4 businesses fall into insolvency as a result of late payment of invoices. While business owners need to worry about paying suppliers, staff members, rent and bills, unpaid invoices can have serious consequences. For freelancers, invoices are direct income and going unpaid can mean getting into personal financial difficulty. With this being the case, can you really afford to wait?
This post looks at five ways you can manage debt recovery and payment procedures in your business.
1. Clear payment terms
From the outset, your clients should know when they are expected to pay you. However, this means setting out in unambiguous terms the work you are doing, when that work will be completed, the cost and when you will raise an invoice for the work. Once you have established a process, draft a document and include it in your terms of work. Such a clearly drafted document can help to avoid disputes and delayed payments.
2. Invoice on time
This may seem simple, but raising your invoice quickly, demonstrates that getting paid is important to you. It also provides the person or business you are invoicing with certainly – they are not left waiting for an unexpected invoice to appear. Ensure your actions match your business terms and be prompt and clear when raising an invoice.
3. Schedule reminders
After you have sent your invoice, be sure to set a reminder for when it falls due and check whether it has been paid. If your invoice has not been paid by the date mentioned, you should send a reminder email or letter. Following up sends a clear message that you take payment terms seriously.
4. Establish a process for late payments
No matter how diligent you are with your terms of business and chasing invoices, you will likely encounter late payments. You should establish a clear process for dealing with late payments, which may even include the assistance of debt recovery lawyers. You may wish to include several steps in your approach, including starting with a simple phone call to establish why payment is late and when you could expect to be paid. Once you have established your process, you can explain to the client that you have a standard escalation process, which may include charging interest.
5. Getting legal advice
In some cases, it may be necessary to instruct experts to manage the debt recovery process for you. A debt recovery solicitor will initially send a letter indicating that they have taken over managing the debt – in many cases, this is enough to prompt the debtor into paying.