Late Payments Are Adding Up For Growing Numbers Of Businesses
With soaring numbers of UK businesses struggling because of late payments, the specialist debt recovery team at leading Yorkshire law firm, LCF Law, has revealed what SMEs can do to mitigate the risks of overdue invoices.
A survey of over 2,000 small business respondents by GoCardless and the Federation of Small Businesses (FSB) found that 45% of businesses are experiencing more late payments than 12 months ago, and 50% are concerned the number of late payments will rise over the next 12 months.
Andrew Langton is a partner at LCF Law and heads up the firm’s debt recovery team. He explained: “In today’s business environment, maintaining healthy cash flow is essential for growth and stability because late payments can significantly impact cash flow, hinder growth, employees might get paid late and it increases financial stress. In extreme cases, late payments can even cause otherwise successful businesses to cease trading.
“Implementing effective strategies to ensure invoices are paid on time is crucial for maintaining operational stability and building strong client relationships.”
LCF Law’s debt recovery team have compiled a list of key points to help reduce the risk of late payments:
Provide clear and detailed invoices - make sure invoices are accurate, clear, and detailed. Include all necessary information such as payment terms, due date, invoice number, and a breakdown of charges. Clear communication reduces confusion and delays.
Set and communicate payment terms upfront - establish payment terms before starting work - whether it’s 30, 60, or 90 days - and communicate these clearly to clients. It may also be possible to include late payment fees or discounts for early settlement to incentivise prompt payment.
Terms and conditions - having clear and up-to-date terms and conditions reduces financial risk. Working with an expert to define contract terms clearly minimises any potential payment disputes.
Send invoices promptly - don’t delay invoicing after delivering goods or services. The sooner your client receives the invoice, the sooner they can process the payment.
Use automated reminders - configure accounting software to send automatic payment reminders before and after the due date. Gentle reminders can prompt clients to settle their invoices without the need for manual follow-up.
Build strong client relationships - maintain open communication and foster good relationships with clients. A positive rapport can encourage timely payments and make it easier to resolve issues quickly.
Offer multiple payment options - providing various payment methods—such as bank transfer, credit or debit cards, or online payment platforms—makes it easier for clients to pay promptly.
Follow up overdue invoices – as soon as an invoice is overdue, follow it up promptly with a polite reminder. Often a friendly call or email can quickly resolve issues and secure payment.
Profile debtors and undertake credit checks – carrying out regular checks to assess whether customers are creditworthy, helps to avoid trading with those that are operating beyond their financial means.
Finally, Andrew added: “Despite best efforts, there will always be invoices that go unpaid and that’s where professional debt collection services assist by offering effective solutions to recover outstanding payments, whilst maintaining business relationships. Crucially, the best collection services are discreet, respectful and tailored to the individual business’s specific needs.
“Ultimately, cash flow is the lifeblood of a business, and recovering outstanding payments is essential to keep the business moving in the right direction.”
LCF Law handles debt recovery on behalf of PLCs, SMEs and individuals, regardless of the complexities of the case. The firm’s Debt Divide guarantee enables businesses to compare LCF Law’s service with their current provider. Businesses divide their debt portfolio in half and assign one portion to their current debt recovery company and the other to LCF Law. If the current provider outperforms LCF Law, the client will receive a significantly discounted fee.
LCF Law is an award-winning full-service law firm, which operates regionally, nationally and internationally, with over 145 people across offices in Leeds, Bradford, Harrogate and Ilkley.
