Here are 5 steps to take every time you take on a new customer to ensure you get paid on time.
Don’t wait for your invoice to become overdue before you find out that your customer has CCJS or bad credit. “A survey conducted by Company Check found that 68 per cent of small businesses have had to write off bad debt. Don’t let this be you.”
1. Ensure you have the correct details for your customer
You need their full name, business and correspondence address, contact numbers and email. Are they a Limited Company or Sole Trader? As this information is imperative to include on your invoice.
What are the consequences of not including “limited” on your invoice?
Let’s say you invoiced a company called FJCM ltd, but you failed to include “ltd” on your invoice. If FJCM ltd were to strike off their company at Companies House, whilst still owing you money, you can write to Companies House to object against the strike off. Companies House will require “evidence” that FJCM ltd owes you money, which means you sending them proof of the debt. Evidence includes copy invoices, a statement or other documents to support your objection. If your invoices or documents do not include the word “limited / Ltd” then Companies House will not accept it as evidence and therefore may allow the company to be struck off. This will leave you having to write off the debt!
If you don’t get the details for your customer, especially for the person who makes the payments, then when it comes to getting paid it can prove very tricky.
2. Discuss your payment terms
Before supplying goods/service to your customer discuss what your payment terms are with them first. How you require payment and when by, means that your customer will be clear about how you operate.
After discussing your payment terms, follow it up in writing so that you have written proof to ensure your customer is fully aware.
3. Run a quick credit check
Running a credit check allows you to see your customers payment credibility and whether they have CCJ’s. You can also verify their address and business ownership too. A good credit score does not necessarily mean they will pay you on time, but it does show whether they have the ability to pay you.
If the service or product you are providing is worth more than £4.95, then I recommend checking your customer before doing business with them.
4. Invoice right away
Once your works are complete, send your invoice right away, within 24 hours if possible. Whilst the works you have done are on your customers mind, its best to get the invoice to them to make payment. Ensure your invoice includes the customers business name (Don’t forget Ltd, if they are a limited company), the address, date, your bank details and your payment terms.
5. Follow up
Contact your customer 24 hours later either by phone or email to confirm whether they have received your invoice and what date they expect to make payment. If you confirm verbally, make sure you email them to follow up in writing with what you confirmed. Documentation in writing is always key.
Follow this 5 step process to get paid on time, it will reduce your customers late payments greatly.
IF you are still struggling to get paid on time, an outsourced credit controller might be the best option for you.
