Clearview National November 2015 - Issue 168 | Page 12

INDUSTRYNEWS

Late payments and how to
deal with them effectively
Bivek Sharma, Head of Small Business Accounting at KPMG
»»For entrepreneurs in the
construction industry, working all hours
to grow their business and innovate, late
payments are presenting an increasingly big
problem. This on going Catch 22 sees business
owners needing their customers to give them
more orders without wanting to harass them –
but they need their cash as well, to survive.
So what’s the answer?
Firstly, prevention is better than cure, so
although you’ll no doubt be delighted to see
your new customer’s first order, you need to be
sure they’re credit worthy. First and foremost,
a good indication of your new client’s
reliability is to agree terms for the exchange up
front, then you can endeavour to get your first
invoice paid on time, sending the right signs
to the customer and helping to make sure
you’ll be paid quickly for any on going work.
Make it clear you will apply the European
Directive on late payment, which allows you
to claim interest, and your customer should
know you’re in business.
Secondly, you might want to consider
insurance; it can be costly, but can be necessary
too. Getting a quote from a credit insurer will
often reveal which customers are at risk and
make sure your ‘all monies’ retention of title
claim is on your orders, so if the worst happens,
you can retrieve your product quickly.
Consider the simple stuff
It may seem obvious, but chasing in
advance of payment dates makes it more likely
that when the time comes, you can expect
the balance in full, or you can identify any
unexpected offsets ahead of time, noting any
queries in monies and helping you maintain a
good cash flow. Email reminders and requests
for email receipts are a great way to help you
begin to balance the books in this case, and
mean you have all invoices stored together.
Thinking about your original agreements with
the customer, it’s also a good idea to include in
your standard terms and conditions of sale, a
clause for charging for Proof of Delivery copies,
guaranteeing your customer has received goods
purchased and that you are owed payment.

12 » N OV 2015 » CL EARVI E W- UK . C O M

If you’ve taken all measures but your
customer is still paying late, talk to them.
Determining why they are paying late means
you can both find a way to resolve the
situation; good communication with your
customer is key for avoiding late payments.
OK, so you’ve done all the
above, but you’ve still got a
late payer. What do you do?
Again - talk to the customer and ask
immediately why. Sometimes there’s a
dissatisfaction issue that has not been
communicated or resolved, which can be
frustrating, but if so, deal with it then chase
for payment, making sure to get a promise
of a date. This way, if they miss it you can
increase the pressure justifiably. Failing this,
consider getting in touch with the CEO of the
company you’re providing the service for; as a
business leader yourself, it’s highly likely they’ll
respond and resolve the issue.
If you’re still not getting paid, there are
decisi ons to be made on how you proceed. You
could take your customer to court - but - it’s
difficult to recommend a court route because
(a) that’s probably the last time you’ll get an

order from the customer and (b) the Ministry
of Justice plans to impose a 5% court fee on
such claims, which effectively means chasing
any debt less than £10k through the courts is
simply not worthwhile.
Sometimes the threat can be enough action,
but beware, aggressive action can produce
payment and potentially save your business,
but at the expense of losing the customer.
Consider the alternative
approach
Using online funders to ‘factor’ individual
invoices typically allows non-payment for up
to 90 days. This carries fewer stigmas than
it used to and can be done confidentially
so the customer doesn’t find out. We would
recommend MarketInvoice, which provides
small businesses with working capital finance
against future payments set to come into
the business and can be accessed directly
through KPMG’s Small Business Accounting
software.
So, overall, focus on ensuring you have
systems that help you to manage this risk,
communicate regularly with your customers
and don’t let them get used to paying late.