How to deal with late payments
When you're running a business, late payment can be the factor
which makes or breaks your plans for the future, reducing profits
and taking up your time chasing them up. While late payment may be
a fact of life in many industries, this guide will help you to get
paid, if not always on time, as quickly as possible.
- Preventing late payments
- What to do if a payment is late
- Charging interest on late payments
Preventing late payments
It's essential before you reach an agreement with a potential
customer to check their credit rating. Have they been reliable with
other suppliers, and if not, why not? If you decide to take them
on, be clear about your payment terms with your customers so they
know exactly when they need to pay you, and consider offering
discounts as an incentive to those who pay on time.
- Run a credit check
- Be clear about your payment terms
- Consider offering discounts
What to do if a payment is late
If a customer has exceeded your payment terms, contact
them and attempt to resolve the issue - find out why they haven't
paid and see if you can reach an agreement. If they still don't pay
up, or they are a persistent offender, get an accountant or a
solicitor who specialises in debt collection involved.
Alternatively, you could use the services of a debt collection
- Contact your customer to see why they have paid late and try to
reach an agreement
- Engage the services of a solicitor or accountant
- Alternatively, try a debt collection agency
It's up to you to agree payment terms with your customer,
including the interest you want to charge on late payment. You have
a statutory right to claim interest on late payment, which
currently stands at 8% above base rate, as well as the terms you
have agreed on in your contract. Whether or not you claim the
interest is up to you - it's worth considering your business'
relationship with the customer, though, before you do so.
- Agree interest rate terms in your contract
- You have a statutory right to claim interest
- Consider your relationship with your customer before
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