Invoicing is a crucial element to your business’ financial process – not only for keeping track of your business’ income and outgoings, but also for documentation and transparency. Getting your invoicing process right is key for your business – and invoices due are causing increasing headaches for the UK’s small businesses.
The Credit Protection Association reports that more than half of the UK’s SMEs have experienced delays in receiving payment, and that late payments owed to SMEs amount to over £17 billion. With an epidemic of late invoices affecting small businesses across the country, what does this mean for your business? And what can be done to speed up the payment process in terms of invoices due?
The Importance of Getting Paid on Time
Late payments to your business can have hugely detrimental effects on your business as a whole. The major issue presented by money due to you is cash flow. Your business might only have so much money in the coffers, and with costly investments for future clients coming up, the final payment from your last project would be hugely beneficial. If late payments from different clients add up, you could well find yourself in the difficult financial position of having been promised profits, but in actuality teetering close to business debt.
In the event of late payments causing your business to struggle, you may have to look for short term countermeasures in order to save the company while you enact measures to chase up the funds owed to you. One such option is invoice financing, by which a company fronts your unpaid invoices, unlocking your income immediately and allowing you to continue growing your company.
Speeding Up the Payment Process
Thankfully, there are simple ways in which small businesses can streamline the invoicing process, reducing the likelihood of late payment and allowing you to return to the important tasks involved in actually completing your work.
- Invoice As Soon As Possible. Don’t wait until the project is finished and handed over to present the invoice for your services. Without knowing the financial processes behind your clients, you cannot be completely sure how long that invoice will spend with their accounting department before approval. Unless a specific contract has been drawn up with clear dates for payment stipulated in it, getting your invoice in with significant lead time is the only way to negate any waiting periods due to accounting.
- Make It Easy. As businesses globally continue to make the shift into digital spaces – now faster than ever –, so too should payment practices. Online payments are quicker, simpler and more accessible than other forms of payment, giving your clients little excuse to honour the invoice sent to them. It may even make sense to purchase a card reader, to enable quicker cashless transactions in person.
- Charge Interest. This may seem like a harsh measure to take, but charging interest on late payments is an excellent way to put pressure on companies to pay up – and to deter future late payments from other clients. The right to charge interest and debt recovery is enshrined in law, empowering you to issue new invoices with an added statutory interest from up to 60 days after the agreed payment date.