Top ten tips to avoid late payment
Bacs has developed some handy hints designed to help you fight back against late payment
1. Boost cashflow overnight
When you’re paid electronically, the funds are cleared and available for use on the day they're received - earning interest immediately as you don’t have to wait for a cheque to clear.
2. Be proactive
Always chase early. A polite call or email can often pre-empt a payment problem. Send a letter to suppliers encouraging them to pay you electronically (it's often used as an excuse, but some cheques do get lost in the post). Being proactive will help build relationships with your customers’ accounts department.
3. Do your homework
Avoid risks when supplying new customers by running a credit check. There are many associations and independent bodies for example Companies House, which can provide status reports for a reasonable fee. This upfront insight is worth its weight. If you knew a company had experienced financial problems in the past, would you still give them 30 days credit?
4. Demand interest
Demand interest on late payments – you are legally entitled to it. And if you have customers who regularly pay you late, you should get familiar with UK business law as a matter of course. For information, go to late payment legislation. The onus is on you to resolve any payment dispute you find yourself in. Write first to bring attention to it, then follow it up with a call. If the customer ignores you and fails to formally dispute your invoice, then you could appoint a third party to pursue the debt. The County Court is another option. If the debtor ignores the claim here, you could consider applying for a judgement against them.
5. Act fast and save money
Our research suggests that transactions made using Bacs Direct Credit costs significantly less to process than a cheque payment.
6. Play to your strengths
Bacs Direct Credit saves time and money. Why waste time signing and paying in cheques when you can let a highly automated system take the strain? You’re then free to focus on more productive issues.
7. They save, you save
Cheque stationery can be expensive due to the need to prevent cheque fraud. Bacs Direct Credit eliminates the cost of cheques and reduces postage and other costs.
8. Better payment terms
Save your own suppliers time and money by paying them using Bacs Direct Credit and settling your regular business bills by Direct Debit. This approach could help you negotiate better payment terms and avoid penalty charges on any overdue invoices or bills. You’ll need their bank sort code, account number and account name. Ask for a copy of their paying in slip or request written confirmation from a company official on the organisation’s headed paper to ensure all details are correct and to avoid fraud.
9. You win, we all win
If you get a reputation as a late payer, word will eventually get around. If all businesses use the tools at hand to settle accounts quickly and efficiently, the economy as a whole will feel the benefit with positive spin-offs all round. And why not reward your prompt payers? Discounts will encourage them and keep the money flowing in.
10. Be upfront about it
It makes sense to explain from the word go that you actively encourage automated payments. It’s the best way to start any business relationship. Make sure you put your sort code and account number on all your invoices – and print ‘Pay Me Direct’ alongside. This saves time on payment reconciliation and queuing at the bank to pay in cheques. Our sample letter can also help, or you could download a Pay Me Direct stamp and include it on all your invoices to help encourage automated payment.