How To Make Sure You Get Paid On Time

By on February 2, 2015
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Don’t be afraid to jog a customer’s memory if you’re still waiting on what you’re owed.

So how can you make sure you get your due without damaging your relationship with a client? MT spoke with Philip King, a former credit manager for Vodafone and the chief executive of the Chartered Institute of Credit Management; and John Kilbey, a senior adviser at the Forum of Private Business, to get their advice on how to hurry customers along.

Do your homework

Much of the work you can do to ensure you get paid needs to be done in advance – not useful information if you’re currently chasing payment, but something to remember for next time. First of all, you need to know if you should be doing business with your customer at all.

King says that credit checks are vital to ensue you don’t end up in a stitch. ‘If you don’t know who you’re dealing with and whether they are able to pay you then you are heading for a potential downfall,’ he says. ‘Credit checks allow you to at least get a flavour of how a business is, and most credit referencing agencies now have payment experience data that they share.’

Be sure to clarify exactly what your payment terms are in advance – a nod and a wink aren’t enough and there’s not a lot of recourse if nothing has been agreed and things go wrong.

Kilbey says, ‘It’s dangerous to assume that a customer will pay on time within your standard period and you should make it clear from the start when you want to get paid by establishing clear payment terms from the start and getting your customers to agree to these and penalties, in writing.’

Get your invoices right

Don’t give a big client any excuse for not paying when they should. Double check if there are any particular things you need to include on the invoice, such as an order number, and find out where you need to send it – even if you’re dealing with someone at an office local to you, the company’s administrative staff could be somewhere else entirely. It should go without saying that you should send the invoice off as quickly as you can.

Asking for it

If your money hasn’t arrived then it’s no good sitting around waiting and seeing if it might show up by itself.

‘I talk to far too many small businesses who say “well I thought it would arrive, I was hoping it would arrive, and I didn’t really want to ring up and ask”,’ King says. ‘Generally money doesn’t arrive without some sort of activity – either getting the process right all the way through so it happens as a matter of course, or not being embarrassed about asking for it.’

‘My line is always this: “If you ordered something then you wouldn’t not ring up when the goods didn’t arrive, so why would you not ring up when the payment doesn’t arrive?” – it’s the other side of the equation.’

It’s easy to get shirty when people are withholding what’s yours, but King says it’s important to remain professional. He adds that a good way to hurry things along can be to get in touch with your original contact within the organisation rather than just dealing with the accounts receivable department – if you’ve got a strong relationship with a buyer then they can be a useful internal advocate for you.

Charging interest

If a client does overshoot the agreed payment deadline then you’re well within your rights to charge late fees. Some people think this is only an option when things have really broken down as they don’t want to prevent themselves from getting future business. Kilbey says that as the law stands at the moment, ‘small firms remain in a weak position when it comes to charging interest.’ King says that’s not always the case though.

‘I know a couple of small businesses who just raise a late payment invoice as soon as the payment hasn’t been received and just send it, and that has the effect of galvanising people to think about it and take it seriously,’ he says. ‘If you tell them in advance that you’re going to do that, it won’t be a surprise to them and it helps to get your invoice to the top of the tree.’

Legal action: the last resort

Delayed payments can play havoc with your cash flow, but don’t pick up the phone to your lawyer too early as it’s unlikely you will be able to deal with the client again. ‘Legal recourse is really a final option, when the relationship with the company has completely broken down and you are not looking to continue doing business in the future,’ says Kilbey.

If all else fails and you don’t want to pay the legal costs of pursuing a claim then you can always try embarrassing your customer into paying. Visiting their offices and telling the receptionist you are waiting there for your cash might just get you kicked out but might just do the trick. Don’t expect to do business with them again though.

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