Late payment of invoices has a massive impact on businesses across the UK; with recent technological advances in payment systems, there is no defence for the age-old excuse "the cheque is in the post".
Late payment of invoices has a massive impact on businesses across the UK. With recent technological advances in payment systems, there is no defence for the age-old excuse "the cheque is in the post".
Late payment is endemic in business, with public companies taking an average of 46 days to pay suppliers, according to annual reports from the Federation of Small Businesses. Late payment eats into profits, reduces net margins and ultimately threatens the viability of businesses. Thousands of otherwise profitable companies fail each year as a result of late or non-payment.
Pursuing a client who is delaying payment can be an arduous business. However the majority of payment excuses come from a few administrative or cash-flow issues and learning a little about how best to respond can get you a long way.
Rick Owens, a manager with Venture Finance in London, advises businesses on how to deal with slow payers and get cash flowing. Here is a list of the top five reasons given for delaying payment and Mr Owen's advice on what businesses can do to rebuff these excuses and get the money in:
1: "We don't have a payment run until next month." Insist on an alternative form of payment, such as a manual payment cheque. For future reference find out when their cheque runs are.
2: "I am unable to raise manual cheques." Rather than being unable to, they mean it's too much trouble. Persist in your request.
3: "There are no cheque signatories available." The majority of businesses require two signatures on their cheques. If only one is available, ask for this to go ahead and tell them to authorise their bank to pass the cheque with just one signature. If no signatory is available, remind the customer of your own payment terms and conditions and that they must pay within 48 hours.
4: "Our terms are xx days." All that matters is what's on the agreed terms document. Fax them a copy and persist with the terms agreed by the customer before the goods were supplied.
5: "We only pay on originals." This suggests that the original has been lost. Send over the fax copy overlaid with the message "This is a bona fide copy of the original". Sign and date this message to fulfil your legal obligation.
As long as companies continue to accept excuses such as these, businesses will suffer cash-flow problems. By keeping a record of customer contact and responding quickly to excuses, businesses can bring late payment to an end and, most importantly, ensure their own business remains viable.Reuse content