Expert Tips For Dealing with Unpaid Invoices for your Small Business
According to research by Barclays, 58% of SMEs are currently waiting on the payment of unpaid invoices in the UK; this rises substantially to 94% for medium-sized enterprises (those with 50 to 249 staff).
As all business owners know, overdue payments pose a significant risk to cash flow stability, leading to problems paying suppliers, tax, wages, and other costs. Don’t worry, we’re here to help which is why this article will cover our top tips on dealing with unpaid invoices for your small business.
Tip 1) Speak to your customer directly
If you are a small business with unpaid invoices, the first place to start is by speaking to the business that owes you money. It is likely that the main contact you deal with is simply not aware of the delay in paying your invoice. If this is the case, they can speak to their accounts person to arrange prompt payment. It may also simply be that they have not authorised the invoice for payment, or they have not passed it to the correct person for processing. In rarer cases, they may have a disagreement with the invoice, and by speaking with them directly, you can resolve the matter.
Tip 2) Agree payment terms with your customers
It is important to formally agree payment terms with your customers and to put these in writing. All too often, businesses experiencing delays in payment of invoices simply have not agreed on how quickly they should be paid (e.g. on receipt, 7 days, 30 days, 60 days). You should also make it clear on every invoice you send when payment is due to avoid confusion, delays and unpaid invoices for your small business.
Tip 3) Make it easy to pay unpaid invoices
In the era of modern invoicing software, it is now easy to add a ‘pay now’ button to electronic invoices allowing customers to pay immediately by debit card, credit card, PayPal and Apple pay. While not all corporate customers will use this facility, it will make it easier for small businesses and sole traders to make payments.
Tip 4) Arrange automated payment
Similar to the ‘pay now’ button tip above, it is now commonplace for suppliers to put in place automated payment arrangements with their customers. Third-party payment providers such as Gocardless integrate with invoicing software to handle the automation of direct debits. Direct debits can be set up for either a regular set amount or the specific value of an invoice. The payment process will then start from the due date you set on the invoice. Remember, it can take several days for a direct debit to complete, from the due date to payment into your account. Again, not all large corporations and businesses will want to arrange direct debits, but for many customers, this saves considerable time and administrative costs.
Tip 5) Send reminders for due and overdue payments
One of the other benefits of modern invoicing and accounting software is the ability to automate the process of sending reminders. You can normally set this up as you wish, allowing you to send a courtesy reminder invoice on the date it is due. This can then be followed up with overdue reminders, perhaps each week if payment has not been made. It is important to keep your system up to date with payments that have been received to avoid customers receiving unnecessary reminders.
Tip 6) Have a clear process for late payments
It is important to have a clear process for late payments to ensure a consistent approach is taken by your staff. Within your late payment policy, we recommend including rules for what should happen and when; e.g. send an email reminder if 1 week late, phone the customer if 1 month late, send a reminder letter after 6 weeks, send a formal letter explaining the next steps after 2 months, and send a letter advising instruction of a debt recovery Solicitor after 3 months (this may include details of any costs and interest payable due to late payment). It is important to put in place a process and rules that meet the requirements of your business.
Tip 7) Seek legal advice from a specialist in business disputes
If, despite all of the steps above, your outstanding debt still has not been paid, consider speaking to an unpaid invoice recovery Solicitor. Guillaumes Solicitors have a dedicated business disputes team with considerable experience in unpaid invoice recovery. Depending on the circumstances, we will recommend the best course of action to recover what you are owed, including sending an unpaid invoice letter ( also referred to as a ‘letter before action’). In the large majority of cases, an unpaid invoice letter is sufficient to resolve the matter and for payment to be made. Where this is not the case, we may recommend taking unpaid invoices legal action for your unpaid invoice recovery. Learn more about debt recovery and how Guillaumes can support your small business with unpaid invoices.
An unpaid invoice for your small business can pose a considerable risk to cash flow and business viability. By putting in place measures such as those outlined above, late payments can be kept to a minimum. If payment is still not forthcoming, we can help you recover what you are owed by taking unpaid invoice legal action in the UK.
Guillaumes LLP Solicitors is a full-service law firm based in Weybridge, Surrey. We have a highly experienced team of dispute Solicitors who can assist you with any business dispute, personal dispute, or property dispute. To make an appointment, please call us on 01932 840 111 or get in touch with us online.