3 posts tagged “check”

Medium to small businesses are at risk of being paid slowly by larger clients. Really bad late payment can even lead to insolvency in the worst cases. It has come to the point that after many years that the  chasing of late payment and managing debtors is a day-to-day task for many small businesses.

In an attempt to help businesses overcome the threat of late payment the Government introduced the Late Payment of Commercial Debts (Interest) Act 1998. This gives small firms with 50 or less employees a statutory right to interest for the late payment of commercial debts. This statutory right to interest and other new entitlements are available to all businesses and public sector bodies from 7 August 2002.

You can many things to avoid the dangers of late payment:-

1. The Late Payment of Commercial Debts (Interest) Act 1998 allows small businesses to claim interest on overdue payments from other companies. Originally drawn up to help small businesses claim against larger businesses, the law now extends this rule to claim debt recovery against other small businesses. Even if you did not state a payment period in the initial agreement with a client, the Act states that a payment becomes 'late' after 30 days. You are entitled to claim interest at 8% above the prevailing Bank of England base rate. It is worth quoting the Act on any invoices sent to clients.

2. Clearly many small businesses feel vulnerable in demanding payment from larger companies, this is very understandable. For this reason, it is essential to follow the initial steps mentioned above when doing business with clients. If late payment occurs, always try to politely obtain settlement for overdue invoices before taking further action.

3. If a client has not paid on time, it is essential to follow up on the invoice. Always try to obtain a point of contact in the accounts department since this will save time. Politely ask for the payment to be made and if the problem persists, you can consider charging interest on the overdue amount, or in the worst case, threaten the late payer with legal action with Business Debt Collection agencies

4. Clearly print your terms and conditions for payment on any contracts (or order confirmations) signed with an end-client. These terms should clearly state the payment period for any invoice - quite often you would expect payment within 30 days, but this could be shorter or longer depending on your type of business. Company Credit Checks are a way of checking your new customers and existing customers

5. You could offer an early payment discount, or a discount for upfront payment of several installments. For example, you could charge £500 + VAT for a service/product if the amount is settled within your agreed payment period, and £475 + VAT if payment is made within 10 days. This is likely to encourage many clients to pay early, although you will of course make less money on each deal.

There are many ways to use the internet to help combat late payment. One of the newest is a name and shame web site offering membership services.

Things just seem to be getting a little tough for Businesses at the moment. Major Banks are reporting a growing number of British firms have fallen behind with their repayments with debt recovery options expanding. This has led to larger companies getting more aggressive and

1) forcing extended credit terms on suppliers
2) demanding discounts on already agreed prices
3) demanding settlement discounts for just paying on time
4) Imposing retrospective rebates for goods already delivered.
5) Using late payment as an easy way of funding their own cash flows.

It is now more important than ever for small businesses to protect themselves and ensure invoices are paid on time.This will help them avoid potential cash flow problems, which, if not addressed quickly could result in the ultimate closure of their business.
These are extremely worrying developments for the whole business community. Companies should be looking at new business debt collection methods to survive whilst not ignoring a good company credit check.

A new internet based service to help victims of late payments has been launched by DUE2PAY LIMITED which has been specifically designed to help these companies recover their overdue invoices, without the need to go to court, also to share information on companies identified as late payers by fellow members, giving them the opportunity to make more informed decisions in dealing with a particular company.

The service is being offered free on a 60 day trial, after which, normal membership fees will apply. If you are interested please contact DUE2PAY.CO.UK

Tips for getting late payments paid earlier or on time

Don’t listen to the excuses
You already know most of them, “Can you resend the invoice”,  “it’s passed for payment” and  ‘the cheque is in the post’. Get invoices paid directly into your account. Your customer can not themn use the excuse that the cheque may be lost or that it is waiting for signature. You can also list a late payer on sites  which offer business debt collection services, websites which are cheap and cost effective.

Work  at it
Don’t think that businesses will pay you on time. You need to build relationships with people who hold the purse strings in companies which are slow in paying. Phone them, talk to them, smile on the phone to them, get them on your side. Be like a rat up a drain pipe and pester them in a nice way. Before you know it you will be the first to be paid.  A phone call in advance of the payment date confirming that you will receive payment puts your contact on the spot and he might not want to let you down. Paying direct into your bank is good, meet with your customers and press them into this

Ask for interest and ask for prompt payment
It is possible and legal  to ask for interest on late paid invoices.
Encourage prompt payment, if your pricing allows , hard in today’s climate, offer a prompt payment discount and link it in with Bacs electronic payment. You will see a positive cash flow with money going into your account quickly. Not waiting for money to clear means that you can use it immediately and don’t have to rely on costly loans.   

Do as you ask
Don’t get a bad reputation yourself as a bad payer news travels fast so pay your suppliers on time.  

Is a business a bad risk ?
Check them out through  debt recovery companies or associations they may be in, check out Companies House which can provide reports on line to you. Prevent risk by doing a credit risk check on all new potential customers.  risk by performing a credit check on all new customers.  Beware of companies which give may give referees which provide a big proportion of their supplies, ask what percentage they are responsible for. That supplier may be paid on time every month because not to do so could influence deliveries. Business debt collection is hard, one needs to be tough to make it work.

Internal Cost of Late Payment

Some companies are paying for dedicated staff to chase late payment others are not so fortunate. On average the internal cost for those not able to afford dedicated staff can be up to 20 lost working days per year.