Encouraging prompt payment is at the heart of good cashflow management. Conversely, late payments by your customers can make your business vulnerable as you risk getting into financial difficulties.
So how do you encourage prompt payment by your customers? Read our top tips below for some practical ideas.
Although of course you cannot guarantee that your customers will pay you on time even if you implement these suggestions, you can certainly cut down on the incidence of late payments.
Use Your Invoices To Encourage Punctual Payment
1. Calls to action
Putting a clear call to action on your invoices can help to ensure speedy payment. In other words, rather than simply saying; ‘This invoice is payable on receipt’ mark the date that payment is due clearly on the invoice.
2. Incentives
Offer favourable payment terms and incentives to encourage prompt payment. For instance you could try offering a discount to customers who pay your invoice by a certain number of days after it has been issued and before it is actually due. Even a discount of as little as 2% can encourage people to pay early.
3. Use the Law
The Late Payment of Commercial Debts (Interest) Act was introduced in 1998. It was designed to give companies a statutory right to claim interest from customers who did not pay them what they owed by the time payment was due.
Referring to this act on your invoices in the following way can help to encourage prompt payment:
‘Interest will be charged on overdue amounts in accordance with and at the rate prescribed by The Late Payment of Commercial Debts (Interest) Act 1998’.
General Advice
1. If someone has not paid you on time, do not be afraid to contact them to find out why. There may be a simple explanation such as them not having received your invoice.
2. If a number of customers owe you money, contact the people who owe you the most first.
3. Involve third parties where necessary. This is where our services can help.
We are able to contact the people who owe you money on your behalf and encourage them to settle any outstanding payment issues within ten days or face being registered by us.
In our experience of chasing late payments, letters from third parties normally get a faster response than letters sent out by the company which is owed money.
Source by V Selman