Late payments, non-payments, missed payments, languishing invoices – if this sounds like the usual waking nightmare for your SME, you're not alone. This type for payment misbehaviour is rife in the UK, and it's having a seriously detrimental effect upon Britain's struggling SMEs. According to recent statistics, £55 billion of late payments are currently owed to small and medium enterprises in the UK. It's no wonder then that small businesses on our shores are finding things like accumulating the capital to stimulate growth, supporting the everyday running of their business and simply keeping afloat, difficult. Unreliable revenue streams are very bad news for British business. So how can you buck the trend and make sure your invoices are paid, pronto?
1. Get to know your customers with free company checkers
We're not talking about getting to know your prospective clients over a pleasant business lunch. We're talking about dipping into their business history using a free company check tool, with a database of over 220million companies, we recommend using Rmonline.com. It might feel invasive, but this is an essential piece of due diligence if you want to ensure you don't go into business with a regular late- or non-payer.
These free company checkers will serve up lots of helpful information which allows you to make an informed decision about who you work with. County Court Judgements (CCJs), insolvencies, non-payments, bankruptcies – these details are all available and should be considered warning signs which could lead to difficulty getting your invoices paid on time (or at all).
2. Ask for up front payment
If you do decide to work with a client or customer even after their company check reveals a history of non-payment, it's in your interests to ask for payment up front. In some cases, you might want to ask for up front payment from customers with an unblemished report, but this can seem rather aggressive and leave your lead feeling vulnerable and suspicious. After all, how can a new customer be sure you'll deliver on your promises?
One route around these sorts of objections is to arrange an escrow account or a client trust account. Although this can be a labour-intensive step, it will also ensure you always get paid (as long as you meet expectations).
Clients with fishier looking credit reports, however, may be more amenable to the “pay first” system, particularly if you explain your qualms. A “half-now, half on delivery” set up may also work well.
3. Get up close and personal
There's no exaggerating the power of a trusting, personal relationship. In business, a soft approach can help to ensure your invoices are paid. Nurturing a sense of mutual care and respect with your clients and customers will encourage them to pay your invoices on time as they will understand that non- or late-payments have personal, knock-on effects for you. Learning to communicate with clients, giving them your personal time and showing them that they are valued is an essential part of this process.
4. Embrace the grapevine
Taking a close look at a company using a free company checking tool is a good way to get to know a business, but not much can beat first-hand information from a trusted source who has had dealings with the client in question in the past. If you ensure you only deal with clients who are “known” quantities, trusted by the people you trust, you will find that incidents of late payment are lower.
This works on two levels. Not only do you have a trustworthy source vouching for a particular potential client, you are also connected to the potential client's circle. Any bad behaviour on their part is therefore much more likely to get out and damage their reputation. This all encourages responsible, timely invoice payment.
Has your business ever suffered from non-payment or late payments? What effect did this have on your business? How do you make sure that you get paid, properly? Share your ideas and experiences with our readers below.