Giving Your Business a Healthy Chance of Being Paid
20th April, 2015
Last year 44% of small and medium sized businesses suffered from late payments. Solicitor Bryony Cook looks at how you can stop this happening to your business.
1. Know your Customer
Will your customer be able to pay your bills? Can they afford to do so? Is your customer a Limited Company or Partnership or an individual trading from home? You need to know this information at the outset and ensure that all your invoices are in the correct customer name and address. If not, this can cause difficulties when you come to chase that customer for payment. You may also like to get some form of credit report because if a customer is unable to pay, it is unlikely you will want to work for them. If need be, and if your customer is a Limited Company, you could think about getting Personal Guarantees from the directors or any parent company.
2. Documentation – Terms and Conditions
Making sure your terms and conditions are incorporated into the contract between you and your customer can often be the difference between getting paid and not getting paid. Simply putting your terms and conditions on the back of an invoice or sending out your terms and conditions before a purchase order is sent back to you, will not usually achieve this. By making sure your terms and conditions are properly incorporated you are one step closer to actually getting paid and being paid on time. The best way to go about this is to make sure that you get your customer to sign a contract which attaches your terms and conditions.
3. Credit Control
Be strict about payment. As soon as your invoices fall due, send a reminder letter out to the customer. It is often true to say that “they who shout the loudest get paid first”.
4. Know your Rights
Make sure you know what legislation you can use to encourage your customer to make payment on time. If your customer is another business you can add Late Payment Compensation Costs to the overdue invoice together with Late Payment Interest. This often will get your invoice(s) put to the top of the pile for payment and will offset the real cost you suffer from not being paid on time.
Be prepared to commence proceedings if necessary. If you have prepared effectively and planned for the possibility of late payment it is often true that litigation will pay for itself. As detailed in point 4, you may be able to add both Late Payment Compensation Costs and Late Payment Interest to the sum you are claiming together with the Court Issue fee.
For more information, or for help chasing unpaid invoices, contact Bryony Cook on 01244 405412 or by email to [email protected].
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