Even chasing these late payments can also be a drain on your already stretched resources, taking time and money away from other areas of your business. Putting ground rules in place can help you protect your business and your bottom line, as well as preserving those precious relationships with your clients. So, with this in mind let’s explore some helpful tips to ensure your invoices are paid on time, every time.

Make Your Invoices Clear And Professional

Writing up invoices can be time-consuming and incredibly dull, and this is often reflected in the end result. Dull, boring invoices can easily be overlooked or forgotten about, causing you a bigger headache later on. Updating your invoice software and utilising invoice templates will help you create eye-catching, memorable and high-quality invoices within seconds. Customisable templates will also help you build a strong business identity, with bold logos on professional-looking documents that will encourage loyalty to your brand, as well as better recognition.

Automate Your Invoices

Automating your invoices every month helps in two ways. Firstly, you’ll know that the job has been done and it’s one less responsibility you need to oversee. Secondly, when your invoices are automated, clients can’t claim that they didn’t receive your invoice or that it’s been misplaced. Automation leaves a digital paper trail that can’t be ignored or disputed.

Be Willing To Check In

Of course, some payments are often late, due to a lack of organisation and forgetfulness on your client’s part. If payment is late, it’s always worth checking in with your client, to enquire. While reaching out and chasing payments can sound daunting, there are gentle ways you can prompt or remind clients about outstanding amounts without being aggressive, such as calling to enquire about their satisfaction with your services and if they haven’t paid because something wasn’t quite right. Most of the time, clients will feel embarrassed at their oversight and pay you straight away.

Set Clear Expectations

You want to get paid on time, but if you fail to stipulate this in your payment terms, then your clients won’t know this. Stating your payment terms as early as possible, and reminding them of your guidelines when you send out your invoice, will ensure payments are on time and overdue payment collections will be avoided.

Highlight Your Willingness To Pursue Legal Action

This doesn’t have to get personal! In your payment terms, it’s important that you also highlight that you’ll be willing to take legal action if payment terms aren’t met within a certain time frame and after a certain number of reminders and warnings have passed. Stating these terms as early as possible keeps everything professional and clear.

Final thoughts…

Follow these tips to ensure your invoices are paid on time, every time.

Daniel Groves outlines five key steps SMEs can take to keep their finances secure.

Money problems come in all shapes and sizes, but more often than not the biggest financial issue which can make or break a small business is cash flow. Studies have shown that more than 80% of small businesses fold as a result of poor cash flow. These mistakes are easy to avoid, if you plan for them before they become a problem.

Make sure bills are paid on time

It might sound obvious, but never underestimate how important it is to pay your bills on time. Not only does this mean they won’t go up in cost due to interest charges but missed payments can also affect your credit rating, storing up all manner of issues further down the line. 

Technology is your friend in making bill-paying as frictionless as possible. For regular bills, set up a Direct Debit to save you time and money. If you’re unsure what digital tools your bank has to help you pay your bills, talk to them. It is in their best interest to make sure that you are on top of your funds.

Save for emergencies

In these increasingly uncertain times, it is vital that you put some money aside for unforeseen emergencies. It is in your best interest to have an emergency rainy day fund. Problems will - and do - come up, and often the best way to keep your options open when trouble strikes is to have funds readily available. A good way of doing this with minimal effort is taking 10% of your profit each month and moving it to a separate bank account.

Now is also a prudent time to look at your company's outgoing expenditures and cut back. Instead of travelling for a face-to-face meeting, save time and money (and stay safe) by hosting that meeting online. You can then take those saved expenses and place them in your emergency fund account, away from the money you use for running the day-to-day.

Problems will - and do - come up, and often the best way to keep your options open when trouble strikes is to have funds readily available.

Keep a close eye on payments owed to you

It is very easy when running a small business to get bogged down with the day-to-day operation and not keep track of unpaid customer bills. Sending out an invoice is one thing, but it’s quite another to make sure it has been paid on time and to chase if it hasn’t. There are great tools and software which can automatically send reminders to chase late payments, helping you avoid escalating it to a legal issue. This, in itself, can be a lengthy and expensive process. 

You are running a business, not a charity. So make sure you are paid what you have worked or you won’t be in business for very long. 

Get help if you need it

Staying afloat can be extremely hard for a small business in any industry - asking for help isn’t a sign of weakness. If you’re struggling to chase payments or keep track of them, it’s better that you get help (either from technology or a trusted adviser), so you can focus on creating value for your customers. Financial worries can put real strain on business owners if they don’t have experience trying to manage it. 

 “Whatever you do, please don't do it alone,” says Jeremy Frost of Frost Group, a company specialising in business advice for companies struggling. “It can be a frightening time for you but it is possible to solve business problems, especially cash flow issues. If you concentrate too much on the minute details of a problem you miss the big picture.”

Track your financial statements

It is key that you pay close attention to your financial statements. Carefully follow what is going out and what is coming in. If you don't know how to read a financial statement, you can use online guidance to learn as soon as possible. Alternatively, you could employ someone to read it for you if it’s really not one of your strengths or you want to free up some mental processing power to continue to grow your business. Do this by hiring a freelance account manager, rather than bringing a full-time financial team in-house. 

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Final thoughts

It is better to be in control of your finances at all times so that you can react and solve any problems before they escalate. Every company will have one month where their outgoings surpass their incomings but it is up to you to see it, identify why that has happened and make sure it is not a regular occurrence. Don’t assume these issues will just go away. 

Invoice factoring companies offer significant assistance to businesses that handle a large volume of outstanding invoices. These entities help ensure continuous cash flow, thereby making the business more easily sustainable. They do this by taking care of the debt collection function for you. They get direct payments from your customers and forward the money to your account after deducting their fees.

Not all factoring companies can respond effectively to your business’s unique needs, however. In this article, we present the factors that you should look into before you pick the factoring company that you are going to partner with.

Float Period

Almost every factoring agreement has provisions regarding the float period. The float period is the amount of time that you have to wait before a customer’s payment gets posted on your account. Usually, float periods last up to the three days since the payment is made.

The waiting is going to be an issue if it is stipulated in your contract that the factoring fee increases as the outstanding invoice ages. We shall talk more about this when we discuss pricing below.

To illustrate, suppose the contract states that the factoring company can charge 1.5% of the invoice amount for invoices that had been outstanding for 16 to 30 days, and 2.5% for invoices that are 31 to 45 days old. A payment that has been made on the 29th day will only be posted on the 31st day, which puts that particular invoice in a more expensive bracket. This can lead to a significant increase in your financing expenses.

If possible, negotiate with the factoring company to reduce their float period. If you can find one, it will be much better to deal with a company that does not make you wait before they post payments that they received.

Pricing

Generally, the price of a factoring service depends on three major factors: the total amount of the invoices, how long the invoices have been outstanding, and the credit quality of the customers. As much as possible, avoid companies that have lots of ancillary fees.

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Economies of scale still work in factoring deals. Since many of the expenses associated with the maintenance of the factoring relationship are somewhat fixed, you get more value for money as the invoice value gets bigger and bigger.

The age (in days) of the outstanding invoices matters because this is also the length of time that the factoring company’s money is out. Clearly, the risk of an outstanding invoice not being paid rises with time.

Finally, the credit quality of the customers matter because this represents the likelihood of the money being returned. If your company’s customers have generally bad credit ratings, then you should be ready to pay more to compensate for the risk that the factoring company is going to take.

Customer Service

Factoring relationships clearly involve money, and things can easily go wrong when money is at stake. Due to this, it’s important that you choose a factoring company that is represented by people who are approachable and easy to talk to, making it easier for you to communicate and make requests whenever necessary.

Choosing the right factoring company isn’t overly difficult, but it’s still something that you need to do systematically. Presented here are just three generally more important aspects. There might be others that are unique to your niche or industry.

What are the things keeping senior finance managers and executives awake at night? The COVID-19 pandemic and resulting lockdown have put many finance departments under even greater pressure than before. Mark Vivian, CEO at Claremont, describes to Finance Monthly how the growing demand for financial services can be met using cloud technology.

Organisations are under pressure to grow revenues and cut costs. Businesses need to be more agile than ever before in order to survive and thrive in today’s economy. There’s also the latest finance regulation (e.g. IFRS16) that needs to be adhered to, or legislative changes that need to be made (e.g. HMRC’s Furlough Scheme).

It’s important that the day-to-day running of the finance department can keep going too: invoices continue to be raised, and cash collected. Supplier invoices processed and paid. Employees paid correctly and on time.

Choosing the Right Finance System

When choosing the right finance system, there are number of important considerations businesses need to take into account. This will be largely centred around functionality and whether businesses can find a finance system that is part of a wider set of integrated business applications, such as HR, Payroll, and CRM. Oracle’s E-Business Suite is a great example of this.

As part of their functionality consideration, businesses will also need to consider their specific use cases. For example, is the requirement to have a finance system capable of supporting global organisations working in multiple territories, with multi-currencies and multi-languages, and also local country legislation?

Organisations also need to consider whether they are happy to adopt largely standard “best practice” business processes, which usually necessitates business change, or whether to use customisation to the standard product so that it reflects the way your business works.

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Ground to Cloud

Lots of organisations that we work with have a “Cloud First” strategy, and have “Ground to Cloud” initiatives, moving their key business systems from their own data centres into the cloud. “Cloud” is a ubiquitous term, but it has a number of different meanings. When we are considering choosing the best finance system, there are typically two main choices:  cloud-based applications and infrastructure cloud.

Choosing a suite of cloud-based financial applications offers businesses the benefit of streamlining their IT environment and business processes; procured as SaaS, typically over a 3-year duration.

Choosing infrastructure cloud on the other hand allows you to move your on-premise applications from physical hardware to a cloud platform, replacing the typical arrangement of leasing hardware with the rental of infrastructure cloud. It has lots of benefits, not least the fact that under the old model, IT departments had to predict future business activity for the next 5 years and size up and purchase hardware for the next 5 years on that basis.

A move to cloud infrastructure provides a much more flexible arrangement, where compute and storage resources can be flexed up and down in tune with the organisation’s requirements, either in the long term, or perhaps on a seasonal basis if your business volume requires it.

Partnering with a Managed Services Provider

Whichever model you choose to use for your finance applications and services, it’s vital to use it correctly and get the most out of your investment. Using a complex piece of software is a bit like running a Formula 1 car. It requires a team of expert engineers, with differing specialities, working on it in order to optimise it and make it perform at its best. This is where partnering with a managed service provider (MSP) can make a big difference.

Whichever model you choose to use for your finance applications and services, it’s vital to use it correctly and get the most out of your investment.

A managed service provider can work alongside your internal finance and IT teams to do this:

• Firstly, they’ll provide “fix on fail” support through an Incident Management process, and this will typically be against a Service Level Agreement (SLA) for both responding to and resolving the Incidents.
• Next is Problem Management; getting to the root causes of Incidents that are encountered and resolving them so that they don’t reoccur.
• An MSP will also help you with Change Management, dealing with all of those modifications that will come up over time as your business changes, or you have to comply with changing legislation.
• Finally, a good MSP will be proactive, and make suggestions for how you can optimise your financial applications, perhaps utilising new functionality to improve efficiency and save money.

We saw a great example of helping a Managed Services customer with critical and urgent Change work earlier in the year, when The National Trust came to us wanting to take advantage of the government furlough initiative during the COVID-19 pandemic to support their staff and protect their organisations as their sites began to close. We were able to configure their payroll solution to meet their requirements within a very short space of time.

The end product was deployed rapidly, automatically calculating the rebate amount for each employee, gave each employee a professional standard of notification, and required minimal payroll intervention. The first payroll runs of the month began on the 16th April and by the 25th April the National Trust had successfully processed over 14,000 employees through their payrolls.

Bringing it Together

The pace of change is increasing, putting finance departments under greater pressure than before and COVID-19 has presented an extra challenge over recent months. Many organisations are using Oracle E-Business software to run their finance and procurements processes. There are options to replace this with cloud-based applications, or to redeploy it on cloud infrastructure to help meet business drivers. Working with the right Managed Services provider can help you to optimise your existing software and help you to deliver real business benefit.

Data released in Creditsafe’s Prompt Payment Premier League has revealed Huddersfield FC takes on average 53 days beyond payment terms to pay invoices for its suppliers, the worst of any team from England’s top division.

Meanwhile Brighton & Hove Albion, who like Huddersfield are playing their first season in the Premier League, top the rankings, taking only two days beyond payment terms on average to pay suppliers. None of the current Premier League clubs pay businesses within the agreed payment terms however, with the average time to pay suppliers across all the clubs standing at 12 days.

Swansea City, who alongside Brighton takes only two days beyond terms on average to pay invoices, have the highest average value of unpaid invoices at £11,304. This is almost £7,000 above the league average, which stands at £4,385.

Liverpool are the only club in this season’s top six to better the overall league average, taking seven days to pay suppliers, with runaway league champions Manchester City ranking 16th overall at 12 days. Last year’s champions Chelsea have the second worst record of prompt payments, taking on average 30 days beyond terms to pay.

Last year’s worst offenders to still be playing in the Premier League, Manchester United, have only improved their ranking slightly, rising two places from 19th to 17th.

Chris Robertson, UK CEO said: “It’s still surprising to see that even in the Premier League, where the clubs have never been wealthier, late payments are becoming a growing problem for businesses of all sizes to deal with.

“It’s also striking to see the gap between two of the newest clubs to enter the Premier League, each having totally different attitudes to paying suppliers promptly. It’s clear that being a new club in the league, such as in Huddersfield’s case, is no excuse for paying businesses significantly later than their agreed terms with suppliers, especially when Brighton were able to pay their invoices much more promptly.

“The money Premier League clubs receive through the new television rights deal will total more than £5bn over the next few years, so we can only hope the clubs become better in paying their invoices on time with this additional revenue.”

(Source: Creditsafe)