DEALING WITH LATE PAYMENTS
Dealing with an unpaid invoice is almost certainly not one of the reasons you started your business and a client book full of prompt payers is the goal. Late payments can cripple a small business and in 2017 the UK averaged 66% of invoices that were paid late.
Not only does this impact the money coming in to your business it also eats up your precious time chasing these payments (in case you were wondering the average amount of time to get a late invoice paid is 18 days). This is time you should be spending working on your business rather than chasing things up.
Having a procedure in place for chasing late payments will help. This can start with a payment reminder email to your clients accompanied by a follow-up call to their accounts department. If this approach doesn’t work then we would suggest sending a late payment reminder email or letter. This should state that if your invoice isn’t paid within a certain number of days then you’ll charge them statutory interest, which is 8%, plus the Bank of England base rate for business to business transactions, which is currently 0.75%. So the total statutory interest payable on the invoice would be 8.75%*.
The best way to prevent yourself from chasing late payments is to state clear payment terms in your terms and conditions of business including when payment is due, overdue and when interest would be applicable.
Invoicing at the same time every month or once you have finished work for a client will be seen as best practise. Keep your invoicing procedure slick and follow up late payments rapidly.
Don’t worry about scaring off your clients with a firmer invoicing structure. Having this in place shows that not only are you professional with your business affairs but also that you’ll be professional with theirs too.
*base rate correct at time of writing and due to change 26th March 2020.
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