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Follow on TwitterUK businesses are failing to take advantage of legislation (Late Payment of Commercial Debts (Interest) Act 1998) that protects them against slow paying clients, according to new research by commercial credit agency Graydon UK. Only 4% of businesses surveyed charged interest on late payments according to a poll.
A further 44% of UK businesses said they only occasionally add interest to outstanding trade invoices, while over 50% who admitted to never charging interest. A quarter of the companies who never charged interest said they were worried about the extra administration that added charges would cause them, and 16% mentioned a fear of losing or upsetting clients. Personally I’ve never understood why you would want to keep a customer that doesn’t pay and I very much doubt any good customers will be offended if you politely chase them for payment.
Martin Williams, managing director of Graydon said:
“The late payment culture in this country, particularly amongst large corporates who use their financial muscle to delay payments to suppliers, won’t go away in the foreseeable future, but there is an awful lot smaller companies can do to protect their cash flow in the meantime.
Doing credit checks, chasing payments by telephone rather than by letter and ensuring that the client has received the right service prior to a due payment date are all useful tips, but ensuring that your payment terms and conditions include your right to charge interest on late payments, and that these terms are agreed upfront by clients, will empower you still further.”
I have more detailed advice on getting paid on time in my post How To Banish Bad Debts And Get Paid On Time.
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This blog is about business opportunities and ideas that I spot, think of or hear about and think are useful and interesting. It is intended to provide ideas and inspriation for you to help you find the right business idea for you to then grow it into a successful business.
I do agree with everything said here but would like to add a little too.
It is not always necessary to give full credit, or extend full 30 day terms. Be prepared to request deposits or COD, after all – costs are being incurred and a good or service has been delivered!
When chasing, also be open to the cash flow situation of others. Be prepared to negotiate a payment plan and be firm that this has to be met. Sometimes demanding payment in full when it just can’t be done may mean getting nothing rather than something.
Lastly, be prepared to stop credit. It’s a two-way street and unless it’s easy for them to go elsewhere there is a reason they are buying from you. You can still provide to them, just don’t open yourself to greater risk by continuing to extend credit!