Getting Paid

Unless you’re a charity worker, unpaid work is worse that none at all. So make sure you get paid for everything you do and, if possible, promptly.

That means having an efficient credit control system and, although it may appear a daunting task, it’s actually quite straightforward.

Terms and Conditions

Before taking on a new client, consider undertaking a credit check to see if they’re financially sound. Ensure you have clear payment terms set out, include them on contracts and invoices, and ensure all clients understand and agree them. The terms will determine when payment is due and the consequences of non-payment; these may include the charging of interest, which you are legally entitled to do under the Late Payment of Commercial Debts (Interest) Act 1998.

A frequent reason for non-payment is the invoice is incorrect. So make sure each one:paid_stamp

  • has the correct client name and address
  • sets out fully and clearly what the invoice covers
  • contains all information the client needs, including contract and order numbers
  • has required documentary evidence, such as timesheet copies
  • includes agreed payment terms
  • provides full contact details for queries.

Do not give clients the slightest excuse for failing to pay on time. Ensure client records are accurate and up-to-date, and keep in constant touch with clients to maintain a good relationship and be aware of changes.

Submit invoices promptly. Many companies operate purchase ledger cycles with cut-off dates so late submission may cause invoices to be delayed until the following month.

Dealing With Late Payment

If an invoice isn’t paid on time, don’t panic. Late payment is often due to client error rather than being indicative of financial problems.

Set up an effective procedure to chase late payments that may be to:

  • send an email reminder after seven days
  • telephone after fourteen days
  • contact again after 21 days
  • start recovery procedures when one month overdue.

At all stages, adopt a friendly but firm approach. You are dealing with a client that, ideally, you want to work for again. However, they are in breach of agreed payment terms and it is money you have earned.

Check if there’s a reason why payment is delayed and resolve any problem that may be causing this. If there isn’t any particular reason, the client may have cash flow problems and that’s a serious cause for concern.

You have to question if you want to put more money at risk and may suspend future work until the matter is resolved. Alternatively, arrange for the debt to be reduced by agreed instalments and ensure the client sticks to the agreement.

Amicable Resolution

Always try to use a personal relationship to resolve the matter amicably. However, don’t allow the client to take advantage of that relationship.

No matter how successful and profitable your business is, bad debts can be fatal if allowed to get out of hand. That can be avoided by accurate record keeping and reporting available through Phoenix Cloud Accounting’s services.


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