Despite repeated calls for reform, there is little support for tackling chronic late payments, leaving businesses to fend for themselves.
One effective solution is to be proactive and tighten your credit control policies to manage the issue.
Strengthening credit control
A solid credit control system can help you keep payments on track. Ideas include:
- Running credit checks before offering payment terms.
- Issuing invoices as early as possible, ensuring they are clear and detailed – you do not want to leave any chance for confusion or dispute.
- Automating reminders to chase up payments before they become overdue.
If a customer repeatedly pays late and ignores your attempts to contact them, it could be worth pursuing legal action or alternative methods to solve the issue.
You may also have to consider removing them as a client.
Reviewing your payment terms
Many businesses overlook the importance of having clear payment terms. Improvement measures might include:
- Setting out payment deadlines and penalties for late payments.
- Defining accepted payment methods and any upfront deposit requirements.
- Carrying out regular reviews to keep up with changes in business and law.
Being upfront about these terms from the start can help avoid disputes and make expectations clear.
The risk of doing nothing
If you fail to address the chronic late payment issue, it could damage your business’s reputation.
Suppliers and partners might start doubting your reliability, and if you are waiting for payments, you might struggle to pay your own bills on time.
This kind of domino effect can create serious financial problems, potentially leading to the closure of your business.
