- Small Business payments

natlie

Hi All

I run a small part tine business and we cater lunches for meetings etc. I invoice on the date of the event with a 2 week payment wondow. Not one of my customers pays by my terms they all pay on their own payment runs. I haven't been paid for 5 weeks - no income at all, I'm spending out for ingredients for my next events and chasing invoices for these but I am not over my credit limit on my account and xmas is coming, I'm currently owed around £700

I send invoice reminders and email the person that booked the lunch but I've done this for one business 7 times now and I don't know what to do next

Thanks
Nat

J_B

Next time they book - tell them that no further business till payment is made ...

spadoosh

Phone them up.

Emails and letters are easy to hold off on. Someone on the other end of the phone line isnt.

trailingspouse

Ring them. Stand up to make the call - sounds daft, but it gives your voice more authority.


Going forward, could you ask for a deposit to secure the date, then full payment on the day? That way you would be buying the ingredients out of their deposit, and getting paid for work done immediately.



I feel for you - it's so frustrating. We have the same problem, and I spend far more time than I should need to chasing late payers.

00ec25

you need to change your business model

as mentioned above, for a business like yours, the deposit taken on order should cover the costs you incur upfront otherwise you will end up exactly as you are now ... chronically short of cash and unable to undertake further orders because you can't buy ingredients to fulfil the order with. It is called managing cash flow

as for the debts you currently have, there is no way to force someone to pay sooner.
Ultimately the only way is to take them to court - but even then they may not pay and you'll need bailiffs
https://www.gov.uk/make-court-claim-for-money

Aquamania

natlie wrote: »

Hi All

I run a small part tine business and we cater lunches for meetings etc. I invoice on the date of the event with a 2 week payment wondow. Not one of my customers pays by my terms they all pay on their own payment runs. I haven't been paid for 5 weeks - no income at all, I'm spending out for ingredients for my next events and chasing invoices for these but I am not over my credit limit on my account and xmas is coming, I'm currently owed around £700

I send invoice reminders and email the person that booked the lunch but I've done this for one business 7 times now and I don't know what to do next

Thanks
Nat

Late payments are the bane of many small businesses, and the stress that can be placed on cash flow as a result has led to the demise of many

If you elect to offer credit, you need to ensure you have good credit controls in place. What controls do you have at present?

Obviously, the simplest way to avoid credit issues with customers is not to offer any. It doesn't sound like you have any credit facilities with wherever you source your raw materials from, but rather rely upon an established credit offering service (bank, credit card, etc) for such.
Why not tell your customers they should so the same, rather than rely upon you for credit?

That may, of course, put some customers off, especially if they are large corporations.
If they are large corporations with good credit profiles, have you considered using a factor to pay your invoices?

If you don't want to do either of these, perhaps a half way house as proposed by others here would assist i.e. ensure you at least receive enough money up front to pay your expenses/costs to fulfil the order.

The issue most companies face that offer any credit is with the terms.
What terms do you have (14 days? - that's extremely tight for those seeking credit terms) and how do you provide these terms to your customer.

What usually happens if that terms of supply are passed to a potential customer with a quotation. Is that what you do?
Unfortunately, when that poteential customer then places an order with you, they will usually provide you with their payment terms (often on the back of the order) and if you then accept that order unchallenged, you are deemed to accept their terms too.

Even if you do challenge it, what eventually it comes down to is who is the mightier, and can survive any resulting dispute.

e.g. if you go to litigation over the matter, who has the deepest pockets to fund ongoing litigation until the other surrenders/runs out of money.

Also, a golden rule you should not forget is that the customer is always right. Forget that, and the customer may not even consider placing another order with you again, and a bad reputation soon spreads often far exceeding even the best of references you may otherwise have.

If you wish to, and can afford to, offer credit, the easiest way to cover late payments is to include the cost of such credit within the order (i.e. add the cost of credit to the price you quote)... and perhaps then offer a discount for prompt payment, although that discount itself can then lead to difficulties.

In regards to the one business that you refer to contacting 7 times, I'm not sure what exactly you mean.

If you mean you have contacted them 7 times over a single payment of an order, then you need to get to the bottom of why they are not paying. Is it a case of can't pay, or won't pay?

If, on the other hand, you mean this is the 7th time you have needed to chase this customer i.e regarding their 7th order. Why???
A non-paying customer is worse than no customer at all.
Think very carefully, and if you do decide to offer your services to them again, ensure any subsequent quotation to that customer not only covers the credit period you will now be aware they expect, but also the collection activites you may need to go to to get that money, especially if not included in the previous quotation to that customer.

In both circumstances, you need to carefully consider accepting a second order from any customer if they have failed to pay for the first one when due.

5 weeks is not especially long in terms of commercial credit terms.

Even where no terms are expressly agreed, 30 days credit (just over 4 weeks) is assumed - particularly if you eventually decide to try and claim statutory interest on late payment.

However, 60 days, 90 days or even as much as 6 months credit is sometimes expected by some of the largest customers. That may seem along time, but some even don't start this period until the start of the month following the month of invoice.

But those large corporations that do expect such long credit terms, often have outstanding credit history. If they don't, what are you doing agreeing to them. If they do, you should be able to take that order to your bank and secure credit against it (if you don't want to use a specialist factoring service) If the bank won't give you credit, don't go offering credit to others; if they will, add the cost of such credit to your prices; large corporations who pay on extended credit terms are often not that bothered by a small premium they pay for such terms.

natlie

Thank you for all your replies, this has given me a lot to think about

Nat

fishybusiness

Not one of my customers pays by my terms they all pay on their own payment runs.

This.

It needs understanding and agreeing prior to booking the work.

I've done it myself, working for a 30 day invoice run business much bigger than mine, I invoice at the end of each week or month, if that happens to be early in the month my client won't process until month end.

I was told the last person walked away because they couldn't take the hassle of the 30 day pay run.

Agree bigger companies won't change their payment runs to help smaller businesses so you either need a cash flow solution or a different set of clients.

rhysadams

Before the work commences, get them to sign a terms of order and also where required run a credit check on the company. On this terms of order make sure you put payment terms clearly.

Joe1981

Would something like gocardless work? Sign new customer up then collect payment like a direct debit.

Joe1981

https://gocardless.com/features/invoicing/