Late payments can be really disruptive to small businesses – when you don’t have much leeway in your cashflow, just one payment can make the difference between failure and success.
Automated credit control company Satago found that every year more than a third (34%) of UK SMEs are forced to write off thousands of pounds of bad debt. There has been some government and industry action but the findings show that they’ve had limited impact – a worrying quarter of SMEs (24%) surveyed believe the situation with late payments has in fact deteriorated over the last two years. Only 17% believe there has been an improvement.
Revealed: the most popular excuses for late payments – and how to deal with them.
“I lost the invoice, or never received it!”
44% of late payments were given this excuse – almost half! Whether it’s poor organisation on one side (or both), there are ways to avoid having to use this excuse, and hopefully to hear it. Always keep a careful record of every invoice your business sends and when, so that you can whip this out when you’re challenged by the client. If they insist they’ve lost it, send again – but warn them that it’s not acceptable or professional. Always double check the details you’re sending the invoice to. If it’s via email consider a read receipt so you know just when they looked at it.
“I’m waiting on a late payment of my own!”
Ah, the peril of dealing with other small businesses, with 32% pleading late payments of their own. If this excuse becomes a regular thing, you need to consider your business relationship with them. This one is worrying. If it keeps happening it suggests they’re having cashflow problems– so think about how your own business would cope if this client jumped ship.
“Wait – I agreed to pay what?”
Yes, you did! An unlucky 13% of late payments had the excuse of an invoice dispute after a contract was agreed. If they’re reasonably unhappy with the standard of the work you might choose to cut your losses and agree to the new price as a gesture of goodwill – but they have signed a contract and so the ball is in your court.
“They don’t even go here anymore!”
Sometimes things are just purely organisational – such as the 12% of late payments that happen because the person coordinating the deal has left the business. To avoid this, ensure there are clear channels of communication in place throughout the whole process – always touch base and don’t let months pass with radio silence.
“I don’t want to pay that!”
An unlucky 7% of late payments happen when the invoice is disputed – but there’s no contract in place to protect the person waiting on the payment. This is a bad situation. You might have to accept the lower amount and write off the debt. Avoid this by always, always, always having a contract!
“Oh whoops… wrong sort code!”
And yes – 5% of late payments happen because they were paid into the wrong account. Facepalm. Avoid this by, well, paying into the right account. Simple!