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Top credit management tips to keep the cash flowing

Research from Bacs suggests that businesses are waiting up to eight working weeks to get paid for an average of £31,000 in overdue payments. Unsurprisingly, large corporate companies not paying on time are the main culprit. Here are our top tips to getting paid on time, plus we let you know how you can blow the whistle on slow paying big businesses.

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Agree payment terms before you supply

It's always dangerous to assume that a customer will pay within the standard 30 day period, so be clear from the outset when you want to get paid. Ask customers to agree to your payment terms, including penalties, in writing.

These terms should also be clearly described on your application forms and the invoices you subsequently send out. Read our top tips for establishing payment terms.

Know your customer

Check the exact name and legal status of each of your customers (you will need this if you ever have to take legal action to recover a debt) and that the order is coming from the same company. You should also use credit reports to verify details further and check their credit status.

Prevent excuses

The Bacs research showed that, frustratingly, almost one in five SMEs chasing late payment were simply told the customer had either forgotten to pay or just hadn't got around to settling the bill. Take away excuses for delayed payment by ensuring that the customer has received the goods, that there are no problems with quantity or quality, and that they know how and when to pay.

Invoice accurately, clearly and promptly

An invoice cannot be paid until it has been received and the goods or services clearly specified on it. Always make sure you have the correct order number and address to send it to, if in doubt just pick up the phone and check. It could save a lot of time chasing payment later on. For more information, read our top tips for efficient invoicing.

Follow up and don't be afraid to ask for payment

For large orders, telephone before the due date to make sure everything is OK. If payment has not arrived on time, make immediate telephone contact with the customer (contact by phone is said to be 80% more effective!) to remind them and check that there is not a problem.

Be friendly but assertive about what you expect and when you expect it, plus remind them that you have a statutory right to charge interest on any late payments. If you do give them an extension, make sure to follow up and don't let the payment lapse. Do what you say you are going to do when you say you will to show them that you mean business.

Take action to recover debts

The money you're owed is rightfully yours, and sometimes the only way of getting it back is with legal action (or sometimes just the threat of it).

Give your business a voice

More than half of small business owners responding to the Bacs survey stated there was little negotiation over payment terms with larger customers. As a smaller business it can be hard to stand up to the big guys – but that's where the Forum can help you. We hold big businesses that apply excessive payment terms on their small business to account by adding them to our late payment ‘Hall of Shame'.

We understand that naming and shaming a client can be damaging for smaller businesses, so we do it on your behalf and you can choose to stay anonymous. Call us on 0845 130 1722 to find out more.

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