How To Avoid Late Payment of Commercial Debts
How To Avoid Late Payment of Commercial Debts
When working for a Business-to-Business organisation, it is extremely common to encounter late payers every once in a while.
The most common excuse for a client not paying you is that they have genuinely forgotten. However, there are other excuses as to why someone may not show a payment forthcoming, including:
- Disputing an invoice due to a mistake, for example, a wrong name or address
- Financially difficulties which have pushed your payment to the back of their priorities
- The client has no excuse other than they had no intention to pay you in the first place
Regardless of the excuse, if you have carried out services or provided goods to a business it is a legal requirement for you to be paid.
In 2019, research collated by SME Invoice Finance noted that there was around £23.4 billion owed in late payments. This also meant that businesses spent around £4.4 billion collecting the money that was owed to them.
It can be detrimental to your business if you do not take action as soon as a client misses their payment date. If you happen to leave this for too long, you are increasing the chances of your cashflow being affected, which can have detrimental effects on the sustainability of your business.
It is important to know how to take action when you are faced with a difficult client who is not paying you on time, as taking the wrong actions can be worse than taking none at all.
Late Payment of Commercial Debts (Interest) Act 1998
The Late Payment of Commercial Debts (Interest) Act 1998 states that if a business has been unpaid for services or goods they have provided, then they have a statutory right to claim interest on the overdue payments.
This may sound extremely positive, especially if you are able to get back more than you are originally owed, however, there are more disadvantages than there are advantages to this.
Not only will this be costly to the business in terms of the time and resources needed to go through legal proceedings, but it can also take a long time to produce any form of result.
Adding interest to the original value may seem like a good idea, but it does not guarantee that the client will pay. If a client was refusing to pay the original value, it is likely that they will be even less inclined to pay the higher one.
In this article, our team of Commercial Debt Collection experts have put together a list of key facts on how to avoid late payments and what to do should these occur.
Top Tips for Avoiding Late Payment of Commercial Debts
Payment Terms – Confirm Prior To Works Starting
It is common practice for a business to have a dedicated Credit Control team that deals with all the accounts and financial aspects of the business. As part of this, there is a process that can be implemented before any services are provided, this is called a Payment Terms process.
Payment Terms are usually set out at the beginning of a project with the business and the client, and outlines when and how much the client is due to pay.
We recommend to set out these payment terms in writing and get both parties to sign. This should eradicate any payments becoming late in the future.
Monitor Your Client’s Credit Ratings
Another common practice within a Credit Control Team is to ensure that when you are providing services to new clients, they are credit checked prior to this.
If a client’s credit rating is green, this will give you a good indication of whether or not they have a good financial history of paying on time. However, it is important to remember that this can change at any time.
Thankfully, online Credit Checking tools such as Experian or CreditSafe are designed to track changes by notifying the user of any decreases. These are checked periodically and will allow you to make decisions based on the changes.
Communicate With Your Clients
We recommend that you contact your client on a regular basis to check in with them to ensure the work you carried out was of a high standard and to remind them of an upcoming payment.
Communication can go a long way when it comes to a client paying or not and will help to grow the relationship between both parties.
It is a known fact that your clients are more likely to keep up to date with their payments and pay on time if the payment process is user-friendly.
It is important to remain professional and friendly when speaking to your clients, as to not appear negatively when it comes to discussing finances.
Commercial Debt Collection Agency – Federal Management
If any, or all, of the above, have failed to produce any form of payment, then it is time to instruct a professional Commercial Debt Collection Agency to recover the money that is owed to you.
At Federal Management, we are industry-leading experts when it comes to recovering late payments from customers that will not pay.
Throughout our long history, we have worked across the globe for a variety of sectors, including, but not limited to:
- Small Businesses
- Manufacturing and Distribution
- Law Firms
- Government Agencies
- Sports Based Organisations
A large number of sectors we have provided our services to demonstrate the calibre of the Commercial Debt Collection solution we provide.
We guarantee the highest recovery rates in the UK which are complemented by our extremely low commission rates. This ensures that you get the most cost-effective service possible, compared to all others on the market.
As part of our mission statement, we take pride in ensuring client relationships are not jeopardised by providing professional and clear communication across the board.
If you are experiencing difficult clients who are not paying you on time, it pays to go to the experts.
Get in contact with our team of expert Debt Collectors today on 0333 043 4420.