Preventing Unpaid Invoices for Small Businesses in 2022
Preventing Unpaid Invoices for Small Businesses in 2022
The occurrence of debts, inconsistent cash flow, and limited income are all examples of financial challenges that businesses face. The late payment of invoices is one of the most common that affects firms, regardless of size.
Most large enterprises will have a business protocol in place to help with financial issues when they arise.
Credit control teams will have the task of dealing with such matters whilst other areas of the company continue daily operations.
Small businesses, by nature, may not have the dedicated time available to do this. Commonly, business owners have to balance this with the running of the company.
Dedicating time away from beneficial tasks that grow the business will in turn affect cash flow. This is undesirable, as all small businesses rely on a consistent income stream to survive.
If you provided goods or services to a customer and they have ignored your payment terms, you need to take action. It is better to plan for unpaid invoices, rather than have nothing in place if and when these arise.
Preventative actions can be set up to reduce or stop the number of small business unpaid invoices.
This Top 10 guide will provide small business owners with expert advice on preventing unpaid invoices.
Top 10 Ways to Prevent Small Business Unpaid Invoices
The FSB reported that 50,000 small firms close down yearly as a result of late payments, costing the UK economy £2.5bn. This shocking statistic highlights how serious late payments can be for small businesses.
Following our tips will help your business prevent unpaid invoices and any damage these could be capable of.
1. Try to acquire payment upfront
Firstly, you should try to acquire payment upfront as this will avoid late payment of invoices.
The payment process can be simplified by using systems such as PayPal or Worldpay.
2. Carry out credit checks on the customer
If the customer cannot pay upfront, it is beneficial to conduct a credit check on them. This will give you an idea of their financial habits and payment intentions.
Knowing at the start if they are likely to pay or not will allow payment terms to change on this basis. Payment habits can change without warning, so we recommend staying cautious anyway.
3. Communicate terms of payment at the onset
Your customer must know of their payment obligations before any goods or services are provided.
Amounts, due dates, and terms and conditions of late payment are all included within the payment plan.
4. Get the customer to sign the payment terms
For good measure, we recommend that you get the customer to sign the payment terms that have been discussed.
Both yourself and the customer should sign this, which will provide you with a legally binding document. This can be referenced should the payment of the invoice become overdue.
5. Ensure all invoice details are correct before sending
Before sending the invoice to the customer, you must double-check that all details are correct.
Attention should be paid specifically to the addresses, the amount owed and who the invoice is for the attention of. Incorrect information will only allow the customer to dispute the payment of the invoice.
6. Make note of any significant dates
You should make note of the date you sent the invoice to the customer and the date the payment is due.
Usually, payment dates are between 30 and 90 days after the invoice has been sent. If you have noted down any significant dates, you can refer to these if payment is late.
7. Send invoice payment reminders
An email reminder should be sent to the customer a day or two before the payment is due.
This is a good way to produce a payment on time, as it will prevent any excuses related to forgetting.
8. Collate all documentation in case of further action
If the outstanding invoice is due, you should collect all records related to this in case further action is required.
This includes any documentation such as contracts, reminders, statements, emails etc.
9. Add late payment interest or charges
Adding interest on unpaid invoices is known to prompt the customer to pay on time and therefore reduce late payments.
For business transactions, this can be charged at the Bank of England base rate on top of the invoice amount.
10. Speak to a debt collection agency – Frontline Collections
If the above methods have proven unsuccessful and late payments are commonplace, we recommend using a debt recovery agency.
Frontline Collections have recovered unpaid invoices for business owners from UK-based and overseas customers since 2005.
Thousands of small businesses rely on our private debt collection solution as part of daily operations.
If you are a small business plagued with unpaid invoices, contact our experts today.
Small Business Unpaid Invoices – Frequently Asked Questions
A customer has an overdue invoice, what should I do?
If an invoice has not been paid, you should contact the customer to make them aware of this. You should remain calm and only communicate professionally.
The customer is ignoring my calls, how do I get the invoice paid?
Should your communications prove unsuccessful and you are without payment, you should contact a debt collection agency. Frontline Collections lead the way for UK debt recovery.
Can a debt collection agency be used by individuals as well as businesses?
Since 2004, Frontline Collections have helped recover money for both small businesses AND individuals.
What is the cost of using a debt collection agency for unpaid invoices?
Debt collection costs vary depending on the individual case, but we minimise this by providing the lowest commission rates.
How successful will the recovery of my small business invoice be?
For all undisputed debts, we provide our clients with an average recovery rate of 90% and above. We maximise results whilst minimising the cost you will pay.