Small businesses _ tips on how to avoid late payers

Unfortunately, late payers are commonplace these days.  Credit terms agreed with them are not always complied with and quite often you can expect to receive payment up to 30 or even 60 days later than agreed.  

As a small business, this can be frustrating, as well as being damaging to the economy and jeopardising reputations.   Here are some tips on how to help combat these problems and generally result in better credit management:.

• Credit terms should be negotiated and agreed in writing with your client before any business is transacted.   If they cannot agree to your terms, do you still wish to work with them?  If so, it seems that you will have to accept their payment terms.  
• As a small business you can charge interest for late payments under the Late Payment of Commercial Debts Interest Act 1998.  You may start charging interest from the date after your 30 day credit period has expired.   If you have agreed 60 or 90 day credit terms, however, you cannot start charging late payment interest until this period has expired.  
• Obtain bank references, trade references or reports from credit agencies to ascertain your client's financial status, prior to providing goods or services to them.  
• Maintain a good rapport with your client, especially with the person responsible for paying the accounts.  Hopefully, you will be top of the list to be paid if money is tight.  
• Have good credit control procedures in place - persistently send reminders by letter, fax, telephone, email or by visiting your customer.  A selection of expertly drafted credit management letters are available.  
• Ensure invoices are addressed to the person responsible for making payments.

For all businesses, extending customer's credit involves a certain amount of risk.  

For more information on the Late Payment of Commercial Debts Interest Act 1998 please contact us.