Carrying the weight of unpaid invoices can make doing business challenging at the best of times and the coronavirus pandemic has caused significant financial difficulties for many when invoices are paid late. This is made even worse for both small businesses, the self-employed and freelancers.
The Forum of Private Business indicates that 1 in 4 businesses fall into insolvency as a result of late payment of invoices. Business owners have to worry about paying suppliers, staff members, rent and bills, unpaid invoices can have serious consequences. For the likes of freelancers, invoices are direct income and going unpaid can mean getting into personal financial difficulty.
In this article we will be looking at the five ways you can manage debt recovery and payment procedures in your business.
It is important from the outset that your clients know when they are expected to pay you. This means you should set out in clear terms the work you are doing, when that work will be completed, the cost and when you will raise an invoice for the work. Once you have these established as a business process draft a document and include it in your terms of work. Clearly drafted document can help to avoid disputes and delayed payments.
Once your invoice has been sent, be sure to set a reminder for when it falls due and check whether it has been paid. If your invoice has not been paid on time or is overdue then you should send a reminder email or letter. Following up sends a clear message that you take payment terms seriously.
This may seem obvious, but raising your invoice quickly, outlines that getting paid is important to you. It also provides the person or business you are invoicing with certainly. This means they are not left waiting for an unexpected invoice. It is important to ensure your actions match your business terms and are prompt and clear when raising an invoice.
It may be necessary in some to instruct experts to manage the debt recovery process for you. A debt recovery solicitor will initially send a letter indicating that they have taken over managing the debt – in many cases, this is enough to prompt the debtor into paying.
Regardless of how diligent you are with your terms of business and chasing invoices, you are likely to encounter late payments. It is important to establish a clear process for dealing with late payments, which may even include the assistance of debt recovery lawyers. It might also be important for your business to include several steps in your approach, including starting with a simple phone call to establish why payment is late and when you could expect to be paid. Once you have established your process, you can explain to the client that you have a standard escalation process, which may include charging interest.
For more information on how the Corporate Commercial Team can help you deal with unpaid invoices, click here to contact Lewis Harvey, solicitor in the Corporate Commercial Team.