Did you know that the average UK business has to wait almost two weeks past the due date for an invoice to be paid? This can have a devastating impact on businesses, especially when you consider that around £50 billion is owed to UK businesses in late payments.
In this blog post, we will discuss some of the measures you can take to make sure your invoices are paid before the due date. We will also provide some tips on how to deal with late payments if they do occur.
Make use of the available software and the benefits of automation
Effective credit control rides a difficult line between being instrumental in ensuring prompt payment, and, therefore, adequate liquidity, and being time and effort intensive for already stretched resources.
This is where credit control software can be a lifesaver, by automating and streamlining many of the tasks that would traditionally fall to someone within the accounts department.
This type of software can automate tasks such as sending reminders for upcoming payments, issuing late payment charges and even making direct contact with customers on your behalf to chase payment.
What’s more, by having all of your correspondence in one place, you can see at a glance which customers are up to date with their payments and who might need a little more attention.
Overall, automating your credit control process can save you time and effort, while also freeing up resources within your business so that you can focus on other areas.
Of course, it’s important to choose the right software for your needs, and to make sure that it integrates seamlessly with your existing systems.
Chaser integrates with Xero, FreeAgent, QuickBooks Online and more, so you can be sure of a smooth transition.
Use early payment discounts to get invoices paid faster
Early payment discounts are a great way to encourage customers to pay their invoices before the due date.
By offering a discount for early payment, you’re effectively giving your customers an incentive to pay their invoices sooner rather than later.
Of course, this won’t work in every case – some customers will still pay late, regardless of the discount.
But offering an early payment discount can be a helpful way to encourage prompt payment from the majority of your customers.
You could offer a small discount (eg: 0.05% or 0.25%) for payments made within seven days of the invoice date, or a larger discount (eg: 0.50% or even up to two per cent) for payments made within three days of the invoice date.
While early payment discounts work well in isolation, they work particularly well when combined with late payment charges. In essence, you’re offering your customers a ‘rebate’ for paying on time, and a ‘penalty’ for paying late.
This sends a strong message that you expect to be paid promptly – and that there will be consequences if payment is not received within a certain timeframe.
Under UK law, you’re entitled to charge interest on late payments (currently eight per cent above the Bank of England base rate), and to claim reasonable debt recovery costs from the debtor.
In order to make this happen, you need to include clear information about late payment charges and interest in your terms and conditions – and make sure that your customers are aware of these before they agree to do business with you.
Give your customers the widest payment options
The best way to get paid is to make it as easy as possible for your customers to pay you. This means giving them multiple payment options and being flexible on when they can pay you.
If you only accept bank transfer payments, you're excluding a whole group of potential customers who may not have a bank account or who prefer to use other methods such as PayPal or credit card. By offering multiple payment options, you'll increase your chances of getting paid on time.
Chaser's Payment Portals offer a range of payment options, including bank transfer, Stripe, credit card and debit card. All your customer's payment details are collected together in one place, so you can keep track of who has paid and chase up any late payments quickly and easily.
You should also consider setting up recurring payments for customers who purchase the same products or services from you on a regular basis. This way, they can set up automatic payments, so they don't have to remember to pay you every time they need your product or service.
Another thing to consider is giving your customers the option to pay you in instalments or over an extended period of time. This can be helpful if they are tight on cash flow or if the purchase was large.
Offering payment flexibility will show that you're understanding and accommodating of your customer's needs and will likely result in them doing business with you again in the future.
Chaser is also capable of handling payment plans and recurring payments, so if you do want to offer your customers more flexibility in how they pay you, we can help make that happen.
Send your payment reminders in advance
Traditionally, payment reminders are sent after the payment is due. But you can increase your chances of getting paid on time by sending reminders in advance.
You can set up automatic payment reminders so your customers know when a payment is coming up and can plan accordingly. This way, they're less likely to forget to pay you and you'll be more likely to get paid on time.
Letting your customer know in advance that a payment is coming up will also give them time to get in touch with you if there are any issues with making the payment. This way, you can work out a solution before the payment is due and avoid any late payments.
Not only does advance warning let them get all their ducks in a row, but it helps prevent bill shock. Bill shock is when a customer is surprised by how much they owe, and it can often lead to them not paying the bill at all.
If you give your customers a heads up about upcoming payments, they can budget for it and won't be caught off guard. This will help you get paid on time and avoid any late payments.
For maximum efficiency, you can also automate your payment reminders. This way, you can set it and forget it, and you'll never have to worry about late payments again.
With Chaser, you're able to set up advance payment advice notices in intervals such as 14 days and 7 days before the invoice is due. This gives your customers a heads up that their payment is due soon, and they can budget for it accordingly.
Get paid on time, every time
By making use of automated payment reminders, you can rest assured that you'll get paid on time, every time. This way, you can focus on running your business and leave the payment chasing to us.
If you're interested in trying out Chaser for yourself, sign up for a free trial today. We offer a 14-day free trial with no credit card required, so you can explore all of Chaser's features risk-free.
