A recent survey has revealed that SMEs are spending an average of 130 hours a year chasing late payments for unpaid invoices and overdue accounts.
The research, carried out by RBS Invoice Finance, suggests that these two factors – spending time chasing late payers, and the impact overdue invoices have on cash flow – are a persistent threat to the well being of small businesses.
The company has suggested measures that small firms could adopt to ease the pain of late payment – we have summarised these suggestions here:
Tips for keeping on top of overdue invoices
- When working out your cashflow forecast, factor in a ‘worst case scenario’, to establish the impact on your business is all your outstanding payments were not paid for several months.
- You might consider offering customers or clients an early payment discount, e.g. deduct 5% if you pay the invoice within 14 days, or for an immediate upfront payment.
- Always clearly print your payment terms on all relevant paperwork, such as your invoices, order confirmations, and contracts.
- Ensure that you have an efficient plan for keeping on top of any outstanding invoices. Make sure you chase up overdue payments promptly, and ask for an accounts department contact when you first do business with a new client or customer.
Mark Qualter, from RBS Invoice Finance, said that business owners could free up a lot of time by outsourcing the payment chasing process to a third party debt collection agency:
“By reducing the need to chase up payments, SMEs could free up to three extra weeks every year – time that can be spent concentrating on business development, marketing or improving customer relationships.”