Research has revealed that, on average, UK SMEs are owed £25k in late payments on any given day, an astounding figure that will ultimately have a detrimental impact on the survival of businesses if left unresolved.
The level of late payments varies from industry to industry, with wholesale trade businesses experiencing the highest late payments with an average of £42,989, followed by administration and support (£40,662) and transport, postal and warehouse (£31,555).
These startling figures highlight the necessity for SMEs to ensure that every possible precaution is taken to reduce their risk to late payments as well as tactics to deal with late payments when they occur. So how can your business effectively tackle late payments?
Tackling late payments
Prior to any agreement between your business and a prospective client, you should take a number of steps to assess their financial standing. Credit checks are an effective way to view a business’ finances, so that you can make an informed decision as to the risk they pose to your business.
Agree payment terms at the outset
Whether your business operates on 7, 14, 30 or 60 day payment terms, you must make your customer aware prior to any work commencing, and ensure that they agree to these terms. As a reminder, your invoice should also state payment terms.
Identify and resolve issues as soon as possible
Issues and invoice disputes will almost certainly lead to late payments. If, however, an issue is identified and resolved quickly, you significantly reduce the amount of time it will take for a customer to pay you.
Proactive credit control
An effective credit control function is one of the most vital roadblocks for late payers. Over time a credit control team will get to know your customers and their payment history, and therefore will know when and how to chase for payment to get results.
Ask the experts
There is no better alternative than a highly experienced credit control team when it comes to tackling late payments from customers. As this is one of only a few customer facing roles within a business, a great team will develop positive relationships with your customers whilst encouraging timely payments in full. If your business struggles with resources for a credit control team, then outsourcing this function may be the ideal option for you.
Our Zodeq 360 service takes care of many different administrative and back office support tasks, including our very own credit control experts, on hand to chase payments on behalf of our clients. Contact our team today to find out more about how we can support your business in reducing risk to late payments.