10 Easy steps to getting paid
SME’s have been faced with two viruses this year. The coronavirus, but also the long running pandemic of all SME’s life is late payments of invoices and reducing cash flow.
So, we have come up with some quick tips to ensure you are on the case to seeing those invoices paid on time.
- Check your sales ledger
This maybe time consuming to begin with, especially if you have not done this for a while. But by spending 10 minutes a day to see who owes you money or are due to make payment over the next few days.
- Call your customers
Maintaining a personal and business relationship with your customers is key in any business. This can also be done when you are contacting them within your credit management process.
A 5-minute conversation is more proactive than an email. Ensure that you have all the information you need before making the call and ensure you close the call furnished with all the information you need as to what date you will be paid, and also deal with any queries straight away.
- Is your invoice clear?
- Make it stand out by using your company branding
- Make sure it contains the word ‘Invoice’
- Add a unique number to make it easy to track
- List your company name, address and date
- Summarise each product/service provided and the date
- Include the name and address of the customer
- Add a payment due date
- Include bank details
- Provide a contact number and email for any queries
- Send out invoices within 24 hours of providing the services/goods and schedule polite payment reminders
And, don’t forget if you are VAT registered you need to include your VAT number.
- Keep an eye on your existing clients
Carry out your own ‘due diligence’ This is where you ensure your clients have been credit checked, and that they are not posing a risk to your business for owing more that their credit limit is listed for.
During this unstable time, it maybe an idea to also review this on a more regular basis, especially if you are getting larger orders from your clients than normal. This could be that they have no credit with other suppliers.
- Due Diligence for ALL new customers
You may find you have an influx of new customers. This can be good, yet it could also be a big issue to your business if you do not do a thorough review and due diligence on these new potentials.
They may want to start trading with you honourably, however whilst the economy will be stretched, they maybe seeking someone to give them credit to keep their business trading. You need to ensure the survival of your business and remember you’re not a charity and have your own overheads to pay.
- What to do if non-payment is persistent.
- Have you actually sent the invoice?
- Have you called the customer for payment?
- Have you sent reminders as part of your collection process?
- Have you issued a final demand?
- If your debtor is a business, then issue a ‘letter before action’ including the late payment of commercial debts (interest) Act 1998 & regulations 2002.
- If your debtor is an individual, you must adhere to the PAP (pre action protocol)
- Do not be afraid to take action – Issue a MCOL (money Claim online) https://www.moneyclaim.gov.uk. There is step by step guidance to help you. Alternatively ask an expert for assistance, we can help you.
- Look at your cash position
- Review your working capital
- Cut all non-essential services
- Work out you Liabilities V your income
- Work out your Cash reserve requirements and include this to you required income figures.
- HMRC are giving VAT and Corporation Tax Holidays. BUT these too will need to be paid back.
- Speak to Landlords and make an arrangement for your rent. If you get the Grant from Business Rates, use this that’s what this is for.
- Furlough your staff, and reclaim under the furlough scheme
- Claim your Business Rates Relief Grant, A grant does NOT have to be paid back.
- Claim Government backed loans scheme BUT be aware loans you must pay back!
- Can you, or staff take wage reductions? Lead by example.
- Can you ‘hibernate’ your business, if so for how long?
- Know your worth
Do not reduce your invoice to encourage payment as this will not only encourage late payment in the future and de-value your brand and your profits, but it is also demotivating for you as a business owner.
- Speak to your suppliers
Your supply chain is as critical as your customers, so you need to have open and frack conversations to ensure you can continue to trade with them now, as well as in the future.
- Make payment arrangements with them
- Find out how their supply is, and if they are having issues in getting the supplies you need.
- As with client’s, credit check your suppliers.
- Get expert advice
Have you ever done a MOT on your business Cash Position, your cash flow management and your unpaid invoices? Or even have a BCAP (Business Continuations Crisis Plan)
This is crucial to any business trading on credit, and without having robust processes and policies, the ability to track your cash flow and keep on top of your cash in flows and out flows, as well as profits will be hard to review. More importantly its about being on top of your recoveries and having the right protocol within your business to safeguard it from failure through lack of cash flow and loss of customers and supply chain.
Pecunia offers a free 1 hour ‘health check’ for your company’s credit management procedures ranging from applications for a credit account through to risk assessment and cash collection. Feel free to contact Tracey on firstname.lastname@example.org for more details. Alternatively contact us through our website www.pecunia2016.co.uk
Tracey Westell FCICM
Director Pecunia 2016 Ltd