By Craig Reid, Partner
As good as it would be, businesses are not always able to keep up with payments, especially when the economy faces hardship.
As this year has been a time of substantial market uncertainty, you may now be left in a position where your finances are not stretching as far as they used to and having unpaid bills will not be helping.
Rather than falling into despair, we want to help you determine the best way to turn your fortune around and keep your business from failing while you wait for those payments to come in.
How to manage late payments
The best way to manage late payments is by creating a cash flow forecast.
This serves as an effective way to determine the scope of the problem and thus allows you to plan your response accordingly.
If you have built a good rapport with clients, it may be worth speaking with them and negotiating a payment plan with them.
Payment plans and credit control can be a good way to keep healthy relationships with clients and suppliers, but they do jeopardise cash flow.
Where necessary, it might be time to seek legal counsel as your clients may be in breach of contracts if they delay payments.
Legal advice can be expensive, so it is natural for some businesses to shy away from this measure.
Many view it as a last resort option and will only assert their legal rights if the late payment is of sufficient value.
Any clients who habitually pay late are not worth doing business with and should be dropped by your business.
How to prepare for late payments
With the state of the global economy in near-constant flux, it is natural to expect some payments may come in late sometimes.
You can prepare for this by reducing the time it takes to invoice your clients.
Using automated software to generate accurate and immediate invoices upon completion of work can reduce the amount of time you have to wait for a payment.
Establishing a good rapport with your clients may boost your chances of getting paid on time.
If they feel like your business relationship is worth preserving, your clients are less likely to breach contracts and make late payments.
Writing into contracts a plan for late payments, which could include the addition of interest or the cessation of regular work until outstanding debts are cleared are good strategies to ensure that your bills are not the ones being overlooked.
Your cash flow forecast is the best tool for detecting habitual late payers and for finding ways to keep going even if payments are late.
With the help of professional financial guidance, it is worth exploring more funding options to ensure that your business can continue growing despite any hardships your clients may face.
We are on hand to help your business dynamically navigate the economic turbulence of our time.
Don’t let late payments hold you back. Speak to our team today.