How to get paid faster
There are many good reasons for getting your customer invoices paid faster, the best of which is to keep your business afloat. There are also lots of good ways to achieve faster payment. Here are my top 7:
1 Credit-check the customer before beginning work. There are many credit reference agencies who will supply a credit report for a fee. Whilst these can be useful, they should not be relied on exclusively. Get market intelligence of the customer, such as speaking to peers, your bank, or trade bodies. If possible, get the customer’s latest data such as its monthly management accounts.
If the customer is found to be a habitual late payer, perhaps with County Court Judgements or worse, then you might prefer to pass on the opportunity, or take greater precautions. These could range from payment on delivery, shorter credit, splitting up your sales, or demanding a deposit.
2 Make terms and conditions of the contract, invoice, and late payment, complete and unambiguous, so there is no room for misunderstanding or dispute by the customer. For example, avoid ambiguous terms such as ‘30d-net’ or ‘payment due on receipt’. State consequences of late payment such as penalty interest, legal action, or cessation of further supplies. State early payment discounts, bank accounts, and acceptable methods of payment such as card, online, or cheque.
3 Invoice the moment you sell a good or service – before the customer (and you) forget. Make invoicing an automatic step at the point of dispatch or completion of a service.
4 Sell your invoice for cash – this is now possible with single invoice finance. It can be quicker and simpler than conventional debt factoring facilities because (if you use Cash for Invoices Limited for example), no security is required, you sell invoices only when you want to, and you pay just one fee. Invoices from as little as £250 can be sold.
5 Build a rapport with the customer. They are more likely to pay you before a faceless business they also owe money to.
6 Have an action plan prepared in case payment is not made on the due date. This broadly will be 1) contact the debtor for an explanation and simultaneously resend the invoice 2) if still unpaid then contact the debtor and state consequences of further delay 3) if still unpaid then take legal steps to collect payment.
7 Whatever the circumstances, always deal professionally and calmly with the customer and an attitude that is realistic, not stubborn. If communication breaks down payment is likely to be delayed further or even withheld entirely. In such circumstances, consider arbitration.
There is no commercial sense in stubbornly pursuing a debtor who is unable to pay in full, when a voluntary agreement to pay over a longer period would recover at least some of the amount owed and would avoid costly debt collection and legal fees.
Dr P Singh is director at single invoice finance provider Cash for Invoices Limited and an Affiliate of the Business Woman’s Network which means you can work with Cash for Invoices and get a discount.
Sources
Forbes;Business.com; Sage; Entrepreneur.com; Xero.com; Huffington Post
There are many good reasons for getting your customer invoices paid faster, the best of which is to keep your business afloat. There are also lots of good ways to achieve faster payment. Here are my top 7:
1 Credit-check the customer before beginning work. There are many credit reference agencies who will supply a credit report for a fee. Whilst these can be useful, they should not be relied on exclusively. Get market intelligence of the customer, such as speaking to peers, your bank, or trade bodies. If possible, get the customer’s latest data such as the its monthly management accounts.
If the customer is found to be a habitual late payer, perhaps with County Court Judgements or worse, then you might prefer to pass on the opportunity, or take greater precautions. These could range from payment on delivery, shorter credit, splitting up your sales, or demanding a deposit.
2 Make terms and conditions of the contract, invoice, and late payment, complete and unambiguous, so there is no room for misunderstanding or dispute by the customer. For example, avoid ambiguous terms such as ‘30d-net’ or ‘payment due on receipt’. State consequences of late payment such as penalty interest, legal action, or cessation of further supplies. State early payment discounts, bank accounts, and acceptable methods of payment such as card, online, or cheque.
3 Invoice the moment you sell a good or service – before the customer (and you) forget. Make invoicing an automatic step at the point of dispatch or completion of a service.
4 Sell your invoice for cash – this is now possible with single invoice finance. It can be quicker and simpler than conventional debt factoring facilities because (if you use Cash for Invoices Limited), no security is required, you sell invoices only when you want to, and you pay just one fee. Invoices from as little as £250 can be sold.
5 Build a rapport with the customer. They are more likely to pay you before a faceless business they also owe money to.
6 Have an action plan prepared in case payment is not made on the due date. This broadly will be 1) contact the debtor for an explanation and simultaneously resend the invoice 2) if still unpaid then contact the debtor and state consequences of further delay 3) if still unpaid then take legal steps to collect payment.
7 Whatever the circumstances, always deal professionally and calmly with the customer, and an attitude that is realistic not stubborn. If communication breaks down payment is likely to be delayed further or even withheld entirely. In such circumstances, consider arbitration.
There is no commercial sense in stubbornly pursuing a debtor who is unable to pay in full, when a voluntary agreement to pay over a longer period would recover at least some of the amount owed, and would avoid costly debt collection and legal fees.
Dr P Singh is director at single invoice finance provider Cash for Invoices Limited and an Affiliate of the Business Woman’s Network
Sources
Forbes;Business.com; Sage; Entrepreneur.com; Xero.com; Huffington Post
Why invoices are not paid to SMEs
Here Dr P Singh from Cash for Invoices shares research and answers to why they say your invoices don’t get paid.
Several reasons have been revealed for invoices not being paid to SMES, but single invoice finance from Cash for Invoices Limited can provide essential cash, says Dr P Singh.
Research cited in CityAM showed an alarming state of affairs in recovering money owed to small businesses by debtors.
The research revealed several reasons cited by small businesses as to why they wrote off billions of pounds collectively owed by debtors. Top of the list was insolvency of the debtor, followed by doubt that the debtor had funds to pay.
Equal 3, 4, and 5th place reasons cited were lack of time to chase, risk of damaging the relationship, and no funds to pursue the debtor.
These are all concerning reasons for SMEs writing off collectively £6 billion of debts in 2015/16 according to Direct Line. The average write off was over £31,000 and a staggering 10% of companies each wrote off over £100,000 owed by bad debtors.
These alarming losses might have meant the company had a shortage of cash flow needed for running its business, such as: paying overheads, managing working capital, growth, or research and development. The shortages might have been made up by urgent loans but that solution will have led to further costs (of interest) and reduced bank funding capacity.
Cash for Invoices Limited in London buys single invoices for cash. It will pay up to 97.5% of the invoice amount less a 10% retention that is handed to the company provided its debtor pays the invoice. The fee is therefore just £2.50 per £100 of invoice for a 30-day invoice. A small price to pay to get cash into the business. If the debtor were to default then Cash for Invoices Limited will not sell the invoice back.
Unlike many bank and other factoring companies, a multitude of fees are not charged to benefit from Cash for Invoices Limited single invoice service. No arrangement fee for example and no service charges, exit charges. Nor are there annual renewal charges because no facility is set up with the selling company. There is no commitment for the small business to sell any invoices to Cash for Invoices Limited.
A significant advantage of the single invoice finance service from Cash for Invoices Limited is that it requires no security off the selling company: no debenture, no personal guarantees, or other charges. That is a substantial improvement over many bank and other factoring companies’ factoring facilities.
If a small business answers yes to either of the following questions, then it would benefit from Cash for Invoices Limited’s single invoice finance service:
1 Do you occasionally need more time to pay your supplier invoices?
2 Would you like invoices you send to customers to be paid sooner?
Cash for Invoices Limited’s single invoice finance service outperforms conventional factoring because:
a) it does not require security from the selling business (such as a debenture or guarantee)
b) just one invoice can be sold
c) there is no commitment to sell any invoices to Cash for Invoices Limited, and certainly not the business’s whole sales ledger
d) very small value invoices (from £250) may be sold, ideal for micro-businesses
e) one fee only is charged, plus a refundable retention. Unlike similar service providers, Cash for Invoices Limited does not charge: arrangement, servicing, renewal, or exit fees. The current fee is just 2.5% of the invoice. The refundable retention is 10% of the invoice. This is paid to the business if its debtor pays Cash for Invoices Limited in full and on time.
f) For supplier invoices, the payment date of the supplier’s invoice bought by Cash for Invoices might be extended, giving the business up to 60 days extra time to pay Cash for Invoices Limited.
To get a free no-obligation quote on how much cash you could receive from selling just one invoice, contact Cash for Invoices Limited or call 0208 987 0429
Wake up to good cash management
Invoice finance, debt factoring, invoice discounting or single invoice finance,
are all variations of a theme: good cash management and not always a sign of desperation. Companies should choose to hold cash rather than illiquid invoices because cash can be reinvested in the business to generate high positive net present value, or can be used to pay off expensive debt. Both increase the company’s profit & loss. Invoices do not. Invoices are a drain on the business, generating no return yet costing money to fund outstanding debtors, either because of interest on debt or because of an opportunity cost, plus they represent a credit risk.
Factoring and invoice discounting have tarnished reputations because many of the firms that offer them take a multitude of fees off of the company selling its invoices and they often commit the company to selling more invoices than it would like to.
Single invoice finance is similar to conventional factoring but it can have several key advantages:
- No security (such as a debenture or guarantee) from the business.
- No commitment from you the business to sell any invoices, so there is no facility established
- Sell small value invoices (from £500) can be sold. Many factoring firms would baulk at buying such a small invoice as it would cost them more to process the purchase than the fee they would earn
- One fee only to pay, meaning the business saves on many fees that conventional firms charge such as: arrangement, servicing, renewal, and exit fees.
An illustrative quote: A single invoice finance company would buy a £100 30-day customer invoice off a company for up to £87.50 paid upfront less the buyer’s fee, and a retention of up to £10 when (if) the debtor pays the invoice, so £97.50 in total (less VAT on the fee). No further fees and no commitment to sell further invoices.
As an affiliate to the Insiders we are able to offer a discount to you, check out this page to learn more and if you would like advice on a particular area relating to cash flow, getting paid and invoicing please do not hesitate to get in touch and we will create content for The Insiders The Knowledge. Contact us here.