At times of economic uncertainty Boost finds itself not only lending to ‘boost’ investments by SMEs, but also to ‘boost’ cash flow when a few extra days starts getting added to payment terms. Comment from Alex Littner, Managing Director, Boost Capital.
It’s unsurprising that late payment becomes a bigger issue than normal when a recession threatens. All the advice around ‘Cash being King’ comes into sharp focus as consumers become a little more cautious about what they spend and the cash flows into the tills a little slower. Businesses worry that their overdraft will get used up, and that the bank will put the pressure on. So invoices stay on the to do pile rather than moving into to the paid drawer.
Much as we at Boost like lending, we are equally keen to see businesses receive payments from debtors on time, and encourage businesses to adopt a five point ‘on time payment strategy’: Too many businesses delay in sending out invoices, not because they are embarrassed to do so, but more that they just leave it for the next day. If you are too busy to invoice, get someone else to do it for you. State clearly the date by when the payment has to be made. When businesses receive invoices, they will always put them on one side to pay later. By emphasising the payment date, you steer the business into diarising payment for a specific day, rather than just leaving it.
Ensure you quote all the references that are required. This is the biggest get out any business has for not paying. No purchase order number, no invoice number, no VAT number, no bank details, addressed wrongly etc etc. Don’t skimp on the details and make sure the invoice is exactly as it should be. Send a reminder invoice three days after the due date – don’t hold back. There is no need to be aggressive, just send the follow up bill just like the major utilities do when we don’t pay them on time. Send a chaser seven days later from ‘Collections’. Even if you are a sole trader, invent a member of staff, give them a ‘Collections @’ email address and send out the ‘anonymous’ chaser letter. That means you can still maintain the personal relationship with your client without offending them, but they know they have to pay. Particularly if Brexit does move us to tighter economic conditions, being focussed on debtor collection will be key.
Tired of ‘Chasing Payments’? – Watch the pop parody of Adele’s song Chasing Pavements below.
