This issue especially with SMEs, often stemming from late or ignored invoices, can impact cash flow and the overall financial health of a business. While managing a few delayed payments might be feasible initially, even the most robust businesses can find themselves struggling if the problem persists.
The Impact of Late Payments on Small Businesses
Small businesses are the backbone of Britain's economy, providing essential job opportunities and boosting financial health. However, a major hurdle they face is late payments. Currently, over 25% of the UK's small and medium-sized enterprises (SMEs) struggle with unpaid invoices, a situation that not only threatens their financial stability but also affects the economy at large. This challenge is more than just a financial burden, with business owners spending up to 30 hours a month chasing these payments.
Addressing these issues comes down to effective debt recovery and credit management strategies. The good news is that there are some steps you can take to make sure you are on top of things.
Proactive Steps Towards Debt Recovery
Ensuring Correct Documentation
The journey to effective debt collection begins with ensuring that your documents are all in check. It’s a common hiccup in the process – invoices ending up addressed to the wrong company, that’s why it's always worth double-checking that you’re using the correct company registration number.
It’s also important to establish a strong foundation with new clients by prioritising clear contracts. Understanding your client and maintaining proper paper trails from the outset can streamline debt collection processes later on.
Setting Clear Payment Terms and Conditions
Decide on clear terms for the goods or services you're providing from the beginning. Get these terms written down and signed by your customer to avoid any confusion. Using standard terms and conditions or agreeing on your customer's terms can make everything simpler.
While having signed terms and conditions and verified ID documents is the safest way to do business, we get that it's not always possible. That's why offering different ways to pay within these terms can help cut down on payment delays, making it easier for your customers to follow through.
Developing a Credit Control Process
It would also help to have your credit control process down on paper, even if it’s just for you. This ensures you always know when it's the right time to escalate your unpaid accounts. It also guarantees consistency if you’re pursuing multiple accounts. This step is essential in safeguarding your business's financial stability and maintaining a clear, organised approach to managing your finances.
Remember, it's not just about having a plan—it's about having a plan that works for you and your business, ensuring you can focus on growth and success with peace of mind.
The Power of Friendly Reminders and Firm Follow-ups
A friendly reminder or a casual request for payment can often be the first step in encouraging people to take care of outstanding payments. It's a soft approach that helps maintain a positive relationship.
However, if these initial attempts do not get a response, it might be time to take a firmer stance. By stepping up communication, you're not just showing your determination to resolve the debt; you're also creating an opportunity to better understand the situation from the other side. This can lead to discovering a solution that works well for both parties.
Enforcing Terms and Utilising Legislation
It may seem obvious, but it also pays (literally) to stick to your terms and conditions when it comes to maintaining your payment expectations. Using legislation to claim interest and compensation where possible can further motivate debtors to clear their outstanding balances. However, when personal efforts seem futile, and the debtor remains unresponsive, it’s crucial to seek professional help.
The Role of Professional Debt Collection Services
Having the professionals in your corner truly makes a difference. We get small businesses - we know each one's got its own story and struggles. That's why we're all about helping you get back what's rightfully yours. With our FCA-regulated, third-party debt collection methods, we've got your back.
By opting for professional debt collection services, you can not only get your money back faster but also keeps your business in good shape for the long haul.
Securing Your Business’s Financial Future
In today’s economic landscape, the ability of SMEs to manage debt recovery effectively is not just a financial strategy; it’s a cornerstone for ensuring the longevity and prosperity of your business.
Utilising Redwood’s no collection, no commission policy means you can use our debt collection services on a trial basis with no upfront joining fees to pay like with other agencies. Whether it’s a one-off late payer or you have regular overdue accounts, we’re keen to show you what we can do.
Reach out today to help your business Grow Stronger.
