Cash is king in business. Don’t let anybody tell you otherwise. Without good cash flow in your business you can’t pay for your products and suppliers and before you know it, your business will cease to function.
According to the European Payment Report 2017 from Intrum, approximately £14 billion is owed to small firms in the UK by businesses that do not pay on time. And, to our eternal shame, the problem here is more notable than anywhere else in Europe.
A staggering 5p in every £1 of UK revenues is written off because of poor payment practice. This compares to 4p in Greece and less than 1p in Finland. Ultimately, the knock-on effect of this to British business can be devastating, with many small enterprises going under because they don’t get paid.
The invoice waiting game is one of the most frustrating things that business owners have to face so here are some quick tips to ensure that you don’t end up in the same boat as countless others…
- Before you sign any contract for work, do a bit of research about the potential client you may be working with. The government now requires the biggest businesses to report their payment practices online. Some of the UK’s biggest businesses are the worst culprits when it comes to paying late so if you’re about to work with a big player, make sure you know where you stand on payment.
- Get your terms and conditions water-tight. It’s amazing how many small businesses don’t bother with terms and conditions but that’s a mistake. Not only will your business look more professional by having proper terms and conditions that are clearly displayed on your website, but it also helps to avoid any ambiguity. If your payment terms state that you expect to be paid within 30-days, then make sure your terms and conditions say that.
- Be clear about your deadlines and payment instructions when sending your invoices. Give your clients more options regarding payment. For example, if you can accept credit card payment or PayPal, then send them links to how they can pay. The easier you make payment for your clients, the quicker you will potentially get paid.
- Don’t be reticent about chasing your invoices. Setting up automated emails that remind clients when payment is due can make all the difference. In many cases, invoices can simply get forgotten so a timely reminder is all that is needed to secure payment.
- If cash flow continues to be a problem, consider flexible cashflow options such as invoice discounting or factoring. Whilst there is obviously a charge for this service, it can often be the lifeblood for businesses so it’ worth talking it through with a finance company.
It’s embarrassing that the UK is one of the worst countries for paying. And as a business owner you shouldn’t put up with it. The more we call-out bad payment practice when we experience it, the more it appears in business headlines, so let’s keep it on the agenda.