Making Late Payments a Thing of the Past

    Giving your much valued customers a credit facility seems on the surface to be prudent thing to do. Giving them that extra bit of time can lead to valued relationships and trust which can secure on-going custom. The process appears to be simple; finish a task, invoice the client and 30 days later you will be in receipt of the funds.  Unfortunately, it doesn’t always pan out that way and the stretching out of payment terms can adversely affect your company’s cash flow and use up valuable resource when you have to spend time chasing invoices. How can these issues be avoided as the double dip recession continues to take hold?

    Retain Control of Company Finances

    It is a widely acknowledged that the chasing of late payments is one of the most common challenges facings SME’s these days. In fact, the British Chamber of Commerce has recently published research that suggests one in four payments are made late, giving businesses of all sorts of headaches.

    Customer Relationships

    There are ways that businesses can take action to avoid these late payments. To start with, it is fundamental that businesses get to know their customers at the outset of the relationship – this way the likelihood of missed deadlines can be dramatically reduced. Payment terms can be established beyond any doubt as they are laid down at the outset of the business relationship.

    As Jo Brookes from Compare Factoring Assist says “making sure your terms and conditions of sale are watertight couldn’t be more important”

    “That way, the customer and client are both clear from the start. Clear communication will stop any cash flow problems from occurring” she continued.

    Perhaps the vital thing to ensure is that these terms and conditions are thoroughly thought out and checked. This way, if payments are late, the customer will not have a leg to stand on and will be forced to pay their invoices in good time.

    Payment Chasing

    In a perfect world, companies would never have to resort to legal means in order to get their payments in but this is sometimes the case. Prevention is always better than the cure but every business needs to have a contingency plan in case things get a bit messy.

    If it is becoming evident that this is the road a company is going down then it is prudent for them to take expert advice from an expert such as a lawyer or an accountant. There are also B2B debt collection agencies available for balances which are less than £5,000.

    Sustain Positive Cashflow

    A popular way for businesses to keep the cash flow moving in a positive manner is through invoice finance or factoring. This means that working capital can be achieved in advance of debtors paying actual invoices and a trustworthy credit control service is also created. This system can also be tailored to meet businesses of all sizes and type.

    “The involvement of a third party in the process can help to balance the books greatly. It can create greater flexibility and a super effective method for managing your businesses cash flow” Jo added.

    Invoice Discounting or Factoring?

    The two ways of going about this invoice finance is through either factoring or discounting. Both involve roughly 90% of the cash being released to the business immediately and the balance is then paid when the client processes their payment. Whatever service charge the factoring company charge is then deducted from the final 10%.

    Factoring is more suitable for start-ups and businesses who invoice in arrears or using credit terms. The provider will then manage the outstanding balance on behalf of the company in question.

    Invoice discounting on the other hand, is definitely better for the more established firms – usually those than turnover £250,000 pet year or more. The company stays in control of the outstanding invoices but the sales ledger information is passed on to the provider. The process remains totally confidential and is often preferred as the business can keep complete control of the relationships.

    For more information regarding any aspect of dealing with late payment, why not visit www.comparefactoring.net. Their team of specialists can help with a wide range of invoice factoring needs.

Customers Stories

Conrad Thornton of Green Street Media tells us how Target Business Assist have provided their business with a new invoice factoring system that has dramatically improved their cash-flow
Conrad ThorntonGreen Street Media LimitedChester, Cheshire

"Target Business Assist have provided our business with a new invoice factoring system that has dramatically improved our cash-flow position and flexibility with our clients..."

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