In a recent survey, Satago Ltd asked 400 firms for the most common excuse they heard for late payment of invoices. “The cheque is in the post” did not actually feature – a sure sign of the death of the cheque perhaps, however they did compile a list of the top excuses for late payment.
Top excuses for late payment
- Invoice not received/lost (44%)
- Unable to pay because they were awaiting late payment (32%)
- Invoice dispute — after contract agreed (13%)
- Person responsible for payment has left the business (12%)
- Customers attempting to renegotiate payment terms mid contract (11%)
- Invoice dispute — with no contract in place (7%)
- Payment paid to different company / account (5%)
Source: Satago Ltd SME Research July 2014
The lifeblood of any business is cash, and cash flow management is one of the most critical activities for the owner of any small business. There are very few facilities available to help small firms work through the inevitable low cash periods of the business cycle, so the pressure is on for the owner to do all they can to manage late payments.
Here are a few tips to help small firms avoid late payments:
- Ensure that when offering credit terms you asses the level of risk, do a credit check and act upon the findings
- Be rigorous in applying your payment terms, firm and fair is the best approach.
- Early contact with the client confirming receipt of the invoice will flush out any issues and encourage payment to terms
- Consider options for early and easy payment, credit cards and incentives for early or prompt payment
- Make sure you have clear terms and conditions of trade to ensure that any debt is enforceable
Running a small business is an exciting and rewarding experience. There are many interesting things that will demand your time and attention, but it can be some of the more mundane aspects that can make the difference between business success and failure!