Member News

How to Mitigate the Risk of Late Payments & Non-Paying Customers

How to Mitigate the Risk of Late Payments & Non-Paying Customers

Alas, as most small business owners know, and have probably experienced, chasing late payments is frustrating, stressful, time-consuming and potentially overwhelming. It's the last thing you want to be doing when you need to concentrate on running, and hopefully, growing, your business.

 

Late payments, unpaid invoices and bad debt can quickly lead to cashflow issues that can affect your staff, partners and other stakeholders in the supply chain. Despite various government-backed initiatives, "big business" is often the biggest culprit and having to suffer 90-day payment terms tends to be seen as a cost of doing business at that level.

 

Invariably, SMEs suffer the most due to a lack of resources (for chasing payments) and a lack of bargaining power (for enforcing payment terms). So, how can businesses protect themselves against non-paying customers?

 

5 Top Tips

 

1. Communication: Get things down in writing at the start, e.g. service agreements, contracts, scope of work, etc. This will be useful evidence should you need it.
2. Due diligence: Be organised and research a new customer before committing to an arrangement that could leave you high and dry.
3. Staged payments: Be wary of new customers who want to pay after work has been completed. It's perfectly reasonable to request an upfront payment or deposit followed by regular payments.
4. Personal guarantee: If you're dealing with a limited liability company, and if the contract value makes this worthwhile, consider asking for a personal guarantee from the company's directors so you'll be protected if the company becomes insolvent.
5. Get legal advice: If you start to suspect an issue could be arising, seek professional legal advice. Taking a customer to court tends to be a last resort, and an amicable resolution is always desirable, but if you smell trouble brewing, talking to a solicitor will give you a proper understanding of your options and potential avenues for recourse.

 

If you'd like to listen to the interview in full, please click here for an overview of the best plan of action and the mechanisms you can put in place to avoid non-payment of invoices and the associated knock-on effects.

 

If you have a question about anything discussed on the show or any other kind of commercial finance enquiry, the expert advisers at Clear Idea Finance are here to help. Call today on 01473 598132 for a free, no-obligation chat or email hello@clearideafinance.com.

Clear Idea Finance logo
Article by Clear Idea Finance Limited

Clear Idea Finance is a fast-growing, independent commercial finance advisory and brokerage business based in Ipswich, Suffolk. With over 25 years' experience in world-class banking and finance, we're the trusted experts for business finance advice. We help business owners, entrepreneurs, property developers and investors secure fast, competitive commercial finance and business loans.

For commercial credit, including acquisition finance, commercial mortgages, property development finance, buy-to-let, business loans, invoice, asset and trade finance, or recovery loans, we’ve got you covered. We can also advise on R&D tax credits. We can help you find the finance you need to grow your business, fund your next project and achieve your goals. Call today!