Why you must chase late payers

Many accountants advise small business owners to delay paying invoices for as long as possible to protect their own cashflow. But for the service provider, these delays have a negative impact on cashflow which, if left unchecked, could cause long-term problems, even throwing the future of the business into doubt.

Some customers demand very long payment terms – some high profile supermarkets are known to demand 45, 60 or even 90 days to settle their accounts. But extending credit in this way is no different to providing your customers with an interest free loan.

Although there is nothing to stop you varying payment terms for different customers, it is essential that (a) these terms are agreed up front and (b) expected payment dates are clearly printed on all invoices to avoid any confusion. In this way both supplier and customer are fully aware of their obligations, removing doubt in the event of a dispute.

It is also extremely important to invoice as soon as possible. Your invoice marks the end of the project and confirms the client’s acceptance of goods/services. The quicker you invoice, the sooner you should be paid, and the better your bank balance should be.

But in the event a customer is late with their payment, you must follow up immediately. In this way you can negotiate part payment or ensure that you have not made a mistake on the invoice that has caused the delay. Obtaining payments quickly and efficiently is essential to ensuring good cashflow that will protect your business by ensuring you can meet your own financial obligations.