The old adage says that “cash is king”, and in difficult economic times it’s never more true. Indeed, it is such an issue that there’s a Government initiative known as the Prompt Payment Code which is dealt with by the Office of the Small Business Commissioner.
Suppliers signing up to the Prompt Payment Code undertake to abide by certain practices:
- Pay suppliers on time – and within a maximum of 60 days
- Give clear guidance to suppliers
- Encourage good practice.
The Prompt Payment Code is intended to be “the gold standard in payment terms”.
However, in practice, there’s some really easy and practical tips that can help get your small business paid quickly and on time.
- Have terms and conditions in place from the outset, which include payment terms, and the right to charge interest and claim compensation and legal fees if payment is late. Asking for prompt payment is nothing to be afraid of.
- Send invoices promptly. Many online accounts software such as Xero and Quickbooks allow invoices to be sent easily and quickly, and even remind you when they are overdue. But importantly, it is always wise to follow the invoice up a few days later, but no more than 7 days, to double check that it was received and that everything was as expected on it. This gives an opportunity to confirm receipt (and so avoid the excuse that it was never received) and also allows the customer to raise any issues such as the amount or the work done etc.
- Do a great job. It sounds obvious, but if you do a great job, exceed expectations in terms of service or price, then customers usually are happy to pay you sooner. It also reduces the possibility of any disputes.
- Chase for payment. Many small businesses fail to ask for prompt payment and then fail to follow up the sending of invoices. Automated reminders sent on 7 days, 14 days and 21 days are a good idea and usually encourage prompt payment.
Sometimes of course invoices remain unpaid, through silence or despite promises. You may need to consider taking further action, such as commencing a Money Claim Online. This is a relatively simple process which most small business owners would be able to do online. It requires you to input a variety of details about the claim into the Money Claim Online website and pay a fee to the Court, but it will then lead to either payment, a CCJ or (if disputed) a Small Claims Court Hearing.
Steven Mather is a Lawyer and Founder of Law eBooks, Expertly Written Legal Guides for Small Business Owners. Their first book, the Money Claims Online Guide, is available now from just £8.99 from their website at http://www.lawebooks.co.uk