The vast majority of small business owners that contact us for help in recovering debts do so for two reasons, either they don’t have the time to, or they don’t like chasing customers for payment. Recovering money you are owed is time consuming and costly, you are using up time and resources that could be better spent actually earning money. That’s if you even make the time to chase up debtors, many small business owners, especially when dealing with a larger business, find the process stressful and uncomfortable and will often just avoid the situation. There are some steps you can take that may help you deal with these common problems:
Ensure that your processes are clear and accurate to avoid delays in payment
There are times when most businesses and companies can find it difficult to pay their suppliers on time, however, more often than not the money you are owed is available to pay you, but a lack of information is delaying payment. The person who placed the order will know exactly who you are and the goods or services the invoice relates to, however, the person in accounts who will be processing your invoice for payment may not know who you are and what goods or services relate to the invoice. If there are any discrepancies or missing information payment will be delayed. The best way to avoid this is to make sure documents are clear and accurate.
When you receive an order always request a purchase order or a purchase order number and ensure you quote this on your invoice. If the customer does not use a purchase order system ask for a signed written order on headed paper and quote the name of the signatory on your invoice.
Your invoices should be clear and easy to read and understand. Invoices should always include a description of the goods and services supplied, a purchase order number, your payment terms, your trading name and address, your VAT number if you are registered and a contact telephone number in the event of a query. Make the invoice specific, including the dates the goods or services were delivered and the date you expect to be paid.
At the end of each month send all of your customers a monthly statement detailing all of the invoices and amounts you are owed. Many larger companies only pay on statement, so if you don’t send a statement you will not get paid.
If you are sure that your invoice details are correct and you have sent a monthly statement, but you are still waiting for payment, its time to pick up the phone. Generally this is the area of the invoicing process that most people find uncomfortable and many will completely ignore, but sometimes if you do not make contact by telephone you will simply not get paid. Structuring your call correctly can help and a good tip is to make it a courtesy call, say you are calling to find out if your customer was completely satisfied with the goods or services supplied. It’s easier to raise the subject of payment later in the call once you know the customer has no complaints “I just thought something may have been wrong as we have not been paid yet”. The other benefit of this approach is finding out if the customer has a genuine dispute and has delayed payment because of this.
If once you have contacted your customer and confirmed the debt is not disputed, but no payment been received or agreed, its time to get assertive. The best way to do this is by knowing your legal rights and understanding Late Payment Legislation. If an invoice has not been paid after 30 days you have a statutory right to add compensation and interest to the original amount. You may or may not decide to do this, but it is a useful bargaining tool in trying to secure payment. Late Payment Legislation also allows you to add the cost of using a third party such as a debt collector, and this is a very powerful tool in securing payment.
If by now no payment has been agreed it could be time to get some help from a debt recovery specialist. Feel free to contact us even if it’s just for some debt collection advice or information about the options available to you.