According to the Independent, more than half of British small businesses are waiting for overdue bills. We’re talking about £44,6bn in outstanding late payments.
Two thirds of these businesses say that their invoices are often paid more than a month late. It may never happen to you, but here are a few quick tips to put you in control if it does.
We’re talking about £44,6bn in late payments outstanding.
When is a payment considered to be late?
If you haven’t included any terms and conditions about when the money will be paid, according to the law, the payment is late after 30 days.
The 30 days will either start once the customer receives their invoice, or once you’ve provided your service — whichever comes later.
Don’t feel bad about giving short invoice payment terms. According to our friends at Xero, somewhere between 70-80% of businesses give 2 weeks or less nowadays.
Okay, so one of my customers hasn’t paid.
That sucks! The first step is to assume this is a genuine mistake and send a polite reminder. If you’re using iZettle Invoice, iZettle will automatically send a reminder for you. With an automated reminder you avoid the risk of sending emotional emails yourself.
Can I charge a late fee?
If you wish, you can claim interest once the payment is late. It’s a statutory right, but it’s up to you whether or not to use it.
I see. How much interest can I charge, then?
Interest rates are set by the Bank of England and are currently at 8%. But you can’t claim the statutory interest of 8% if you and your non-paying customer agreed on a different interest in the initial contract. Keep the 8%-level in mind if you see different numbers floating around.
What else can I do?
According to the late payment legislation, you can charge a business, like one of your suppliers who doesn’t pay you, a fixed sum depending on the amount of debt. £40 for invoices up to £999.99 for instance, for the latest and all information, go to GOV.UK.
Okay. They still haven’t paid.
If you have sent reminders via email, don’t be afraid to pick up the phone and give them a call. Yes, we know. It’s not pleasant, but the key when getting hold of them is to be friendly and ask if there’s a problem with payment. There may be a good reason for the delay, so stay calm and listen, then jointly agree on a solution.
They still haven’t paid. I’m furious. I’ll write a nasty Facebook post and tag them…
Please don’t. Seriously, don’t go there, social shaming will reflect badly on you both.
Well, maybe you have a point.
By building respectful relationships with your customers, issues around unpaid invoices will be less likely to occur.
So, to summarise?
Stand up for your business, communicate clearly and be professional when someone’s not paying you. Listen to what they have to say and try to figure out the situation. And remember – non-payment is occasionally a part of running a small business, but with iZettle Invoice you always have someone to help.
For more advice on invoicing and late payments, read 6 ways to get paid faster. Have you got your tips and tricks for how to keep your cash flow steady and secure? Why don’t you drop us an email at firstname.lastname@example.org? We’d love to feature you!