The average SME owed £16k in late payments
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The impact of late payments on UK SMEs has been brought into stark focus after it was revealed 65 per cent were forced to shut down.
New research has showed more than 50 per cent were owed an estimated £44.6 billion by the end of 2016 – an average of £16,000 per SME.
Half of small business owners have called on the Government to intervene following industry research which revealed 1 in 10 small business owners were owed more than £100,000.
Your business may not be able to wait too long for the Government to offer help to tackle the huge hole in your finances caused by late payments.
For that reason . . .
1. Complete a credit check. Before you agree to conduct business with a client, you should run a credit check to see whether they may pose a risk.
2. Make your payment terms clear. Clearly outline your payment terms, which should include the specific amount due, the date the payment is due and the consequences of not paying on time.
3. Offer incentives for early payment. Consider offering a percentage discount on invoices settled before the due date.
4. Add interest to late payments. If clients do not pay you on time, add interest to what they owe. However, you should only add interest if it has been explained in your payment terms.
5. Remind clients of your pending due dates. Be sure to contact your clients several months before their due date. If they ignore your notices, remind them if they do not pay on time, they will accrue interest.
6. Suggest an installment plan. If your clients cannot pay what they owe in a lump sum, you may want to suggest an instalment plan.
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