In the UK, small and medium-sized enterprises (SMEs) are chasing late payments totaling about £50 billion. The average amount of collectible per invoice is £8,500 and business owners usually spend 90 minutes a day to get payments. Late payments cause cash flow problems which lead to the closure of more than 1,000 SMEs every year. Despite government efforts to address the problem, SMEs continue to experience delayed payments, particularly from larger companies.
There are two ways SMEs can deal with late-paying customers. The first is to persuade customers to pay immediately the day after the payment is due. Avoid escalating late payments by refusing to continue to supply goods or services while previous invoices are still not paid. Seek assistance from the Small Business Commissioner and exercise your right to claim interest on late payments.
The other way is to avoid future problems by getting the know new customers and running online credit checks on them. Clarify payment terms right from the start and avoid accepting cheques because these will only add delay to the payment process. Business owners can also offer discounts for prompt payments just to avoid delayed collections.