In the wake of rising interest rates, maintaining healthy cash flow within your business is more crucial than ever. At Burgis & Bullock, we recognize the challenges UK businesses face in getting paid on time. That’s why we are thrilled to collaborate with Denym Bird from Paidnice, a leading credit control software, to share practical advice on ensuring your invoices are paid promptly.
1. Set Clear Payment Terms from the Start
One of the most critical steps in ensuring timely payments is establishing clear, unambiguous payment terms right from the beginning of your business relationship. Here’s how to do it effectively:
- Clearly outline your payment terms in your contracts and on your invoices.
- Include details such as payment due dates, accepted payment methods, and any early payment incentives.
- Ensure clients acknowledge and agree to these terms before work begins.
- Consider using e-signature tools to streamline the process and maintain a digital record.
By setting expectations early, you create a solid foundation for a smooth payment process. Remember, clarity is key – the more specific you are, the less room there is for misunderstanding or dispute later on.
Tip: Attach your payment terms to quotes or your first invoice using most accounting tools. Automate this process with Paidnice to include it on all invoice sends.
2. Set Up Payment Reminders (Email and/or SMS)
Communication is vital for ensuring your invoices don’t get forgotten. A well-structured reminder system can significantly improve your chances of getting paid on time. Here’s how to set it up:
- Send a friendly reminder a few days before the invoice is due.
- Follow up with another reminder on the due date if payment hasn’t been received.
- Continue with regular, polite reminders at set intervals after the due date (e.g., 7 days, 14 days, 30 days).
- Use a mix of communication channels – email, SMS, and even phone calls for overdue accounts.
Most accounting solutions have built-in reminder systems. For more sophisticated options, including SMS reminders, explore dedicated credit control tools like Paidnice.
3. Leverage Late Payment Fees Effectively
In the UK, late payment fees are regulated by legislation, providing a clear framework for businesses to discourage late payments. Understanding and applying these regulations can be a powerful tool in your credit control strategy:
- Interest rate: You can charge ‘statutory interest,’ which is 8% plus the current Bank of England base rate for business-to-business transactions.
- Fixed admin fees: You’re entitled to charge a fixed sum for the cost of recovering a late payment, on top of claiming interest, tiered by the amounts below:
- Up to £999.99 = £40 admin fee.
- £1,000 to £9,999.99 = £70 admin fee.
- £10,000 or more = £100 admin fee.
Communicate these potential charges clearly in your payment terms. While the goal isn’t to profit from late fees, their presence often motivates clients to pay on time.
Tip: Use automated tools like Paidnice to calculate interest rates and admin fees, and to apply them to overdue invoices each month without error or effort.
For more detailed information on late payment legislation in the UK, visit the official government website.
4. Offer Multiple Payment Options
Making it easy for clients to pay can significantly increase the likelihood of timely payments. Consider offering a variety of payment methods to suit different preferences:
- Bank transfers (BACS in the UK).
- Direct Debit.
- Credit/Debit card payments.
- Online payment platforms (e.g., PayPal, Stripe).
- Instalment plans for larger invoices.
By providing flexibility, you remove potential barriers to payment.
Tip: Clearly communicate all available payment options to your clients.
5. Build Strong Client Relationships
While systems and processes are crucial, the human element of business shouldn’t be underestimated. Fostering good relationships with your clients can lead to more prompt payments:
- Provide excellent service to encourage client loyalty.
- Be responsive to client queries and concerns.
- Show flexibility when clients face genuine difficulties (e.g., offering payment plans).
- Regularly check in with clients, not just when payments are due.
Building trust and goodwill makes your clients more likely to prioritize your invoices. Wouldn’t you rather have your clients call you about a delay than you chasing them for payment?
Bonus Tip: Leverage Technology
Whilst we’re too late to discover the world and too early to explore space we’ve made it just in time to get credit control software that can handle this all for us.
Leveraging credit control software can significantly streamline your processes. Tools like Paidnice offer comprehensive solutions that can:
- Automate reminder emails and SMS messages.
- Provide real-time insights into your accounts receivable.
- Integrate with popular accounting software.
- Offer customizable templates for professional-looking invoices and communications.
By automating routine tasks, you free up time to focus on what’s truly important for your business. Ensuring that the money you are owed lands in the bank on time.
The Last Word
Implementing these five strategies can dramatically reduce your overdue invoice count. We’ve seen this first-hand across hundreds of our clients at Paidnice and Burgis & Bullock. We’re committed to empowering businesses with the tools and knowledge they need to thrive in today’s economic landscape.
Partnering Paidnice with Burgis & Bullock, we combine our credit control expertise and comprehensive accounting and bookkeeping services. Together, we’re here to support UK businesses in achieving financial stability and growth.
Remember: Consistency is key to effective credit control. Educate your customers that you don’t let any of your invoices ‘fall through the cracks.’ It may take time to see results, but with persistence and the right tools, you can significantly improve your payment rates and reduce financial stress on your business.
If you’re looking to take your credit control to the next level, consider exploring how Paidnice can integrate with your existing processes. Our user-friendly platform is designed to work seamlessly with your existing accounting software, providing a powerful solution to your accounts receivable challenges.