With SMEs across the UK chasing over £50bn in overdue invoices, we thought we would put together some tips on how you can ensure your invoices are paid on time.
Agree clear payment terms
Make sure your payment terms are clear, these should be in writing and ideally in the form of a contract. Payment terms will usually fall within your terms and conditions so it is worth reviewing them to ensure they outline how long the customer has to pay from the delivery or invoice date and any late payment fees. Your terms and conditions should be sent out with every invoice so it is clear from the outset what is acceptable.
Your payment terms should be realistic and determined by your current and historic cash flow to ensure you don’t leave yourself in the red.
Don’t forget to invoice
It sounds crazy but don’t forget to invoice! A study by Exact Cloud Solutions found that in just one year, £3.7 billion was lost due to businesses failing to send out invoices for completed work.
Send invoices promptly
As soon as you have sold your product or completed work for your customer, get your invoice out straight away to avoid and delays. Emailing your invoice whilst the sale is still fresh in your customer’s mind, could lead to faster payment.
Use read receipts
Sending invoices via email is one of the most popular and easy ways to get your invoice to your customer promptly. Using a read receipt is a great way to obtain confirmation that your customer has received your invoice. It is also very useful should you need to chase payment.
Make sure your invoice is accurate
Avoid queries on your invoices by making sure they are accurate. Always include the following basic items on your invoices:
- Your name and contact information
- Your customers name and address
- Invoice number
- Invoice date
- Due date
- Total amount due including tax and delivery costs
- Details of the work and the charges
- Payment options and any additional payment terms
- Your bank details
Get to know your customer
Building a rapport with your customer is very important. Knowing the person who processes your customer’s invoices and understanding their invoice policy is essential to ensure prompt payment.
Follow up on overdue invoices
Your overdue invoices should be followed up immediately and you should do this by sending payment reminders via email and calling your customer. Remember to be polite and professional at all times but ensure you are firm.
Add overdue fees
If you are owed money from another business, you can claim interest of 8% above the Bank of England base rate. Under the Late Payment of Commercial Debts Act (Interest), you are also entitled to charge a fixed amount to cover some of the recovery costs. Below, we have set out those charges:
Up to £999.99 – £40
£1,000.00 to £9,999.99 – £70
£10,000.00 or more – £100
You may also be able to recover your reasonable debt recovery costs.
If you are struggling with overdue invoices, don’t just simply write them off. Contact our team on 0800 009 6106 or email@example.com to see how we can help.