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Late payments: Tips for – or against – late payers

late paymentIt’s all very well being versed in the dos and don’ts of tax law, but what happens when regulations are the least of your worries – as you’re missing the money they’re attached to?

Welcome to the world of late payments. Too many clients don’t pay on time – or at all. It can be a nightmare, but a bit of organisation and tough love can put you and your problem customers on the right track.

Fortunately, we have some tips to make your invoicing, and chasing, flow as smoothly as your tax returns.

To be free from these clients’ issues, you’ve got to understand them. People miss payments for all kinds of reasons.

They know doing this will cost them- in time and in interest. And of course, eventually, in legal fees and compensation. Make this clear, but keep an open mind and listen to any explanations and pleas. Not that these will always make sense – or be feasible.

Create and maintain a fees spreadsheet – those paid and those outstanding. Label all paperwork, both sent and received, clearly – INVOICE, LATE PAYMENT FEES, OVERDUE NOTICE.

An invoice reminder feature, or one that adds a link to your payment details, can be a lifesaver – try FreeAgent, or even an automatic email. If they’re aware, they won’t be scared.

Nothing should come as a surprise to either party. And everything should have a second copy made – and kept on file. Create a paper trail of all invoices, incomings and outgoings. And keep it flowing.

Make a list of all interest fees at the start. That way, clients can’t say they weren’t aware of the consequences of anything that was due but is late- or missed.

What about clients who disappear completely? This isn’t an uncommon problem, but, of course, can place a huge dent in your business’s finances. Decide whether to let it lie and blacklist the client, or to chase the payment through a collection agency or claims court.

Only you know what’s best for the smooth running of your business – and sanity.

Partial payments and instalments can be friends to both you and the late payer. Just make sure the interest charged and amounts payable suit you and your accounts.

And, most of all, communication is key. You have a trading agreement with your clients or customers. Send all payment information by post AND email. With clear payment records, plans and reminders, missing money – for whatever reason – will be a thing of the past.  Small businesses, especially, need to protect their cashflow.

If that’s you – or even if it isn’t – don’t get stuck.

For more information on any contractor accountancy issues, do get in touch.

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