How do I make sure I get paid on time?
Protect your business - A recipe for success When starting a business it’s easy to focus purely on making the first sale without having the right processes in place to protect your income.
Avoid payment delays or default by adopting some simple “best practice” measures:
1. Know your customer
- Check the exact name and legal status of the company
- Use their letter head to verify company details, carry out a free check on companies house and make sure you have the trading and registered address
- Understand your clients’ purchasing processes and make sure purchase orders are from the company you invoice
- Invest in a credit check report for invoices over a certain amount or ask for trade references from other suppliers
2. Agree payment terms, price and other terms before you supply in writing
- Never “assume” anything and be very clear from the outset how you conduct business
- Obtain written acceptance of your terms and check that your customer’s order does not suggest different terms
- Set out late payment charges & interest in your terms – you don’t have to invoke them but it’s useful to have the right to do so
- Ensure that the payment terms you offer your customers are not more generous than the terms you have agreed with your suppliers. i.e. offering 45 day terms but having to pay within 30 days presents an immediate cash flow issue.
- Confirm verbal orders in writing and obtain customers’ signatures on delivery
3. Invoice accurately, clearly and promptly, attention to detail makes all the difference
- Invoice promptly – it can’t be paid if it hasn’t been received
- Invoice correctly – insufficient details regarding services or goods result in disputes and payment delays
- Quote customer references - missing PO references mean “payment hold”
- Address invoice correctly – incorrect company name or address on the invoice means it will be returned or ignored
4. Don’t be afraid to ask for payment, the only good customer is a paying customer, and if you don’t ask, you might not get
- For large invoices make a pro-active call before due date to make sure all is o.k.
- Don’t delay contacting the customer if payment is delayed
- Be assertive about when you expect payment
- Make consequences of non-payment clear
- Follow up payment promises
- Do what you say you are going to do when you said you would