Late payments and how to prevent them for your business

Late payments and how to prevent them for your business

Late payments are the bane of many Australian businesses, but perhaps even more so for small to medium-sized businesses (SMBs). A recent Sage study reveals late payments collectively cost Australian SMBs $49 billion AUD each year, approximately $41 billion of which is written off as bad debt.

 

Based on survey responses from over 3,000 SMBs across 11 countries, the study found 9% of all payments to Australian SMBs are late, causing them to spend almost $5,000 AUD per year chasing late payments.

 

Why do late payments occur?

 

The study reveals 36% of customers do not give a reason why payment is late. When a reason is given, 12% say the transaction has been made but is pending, while 10% say they only pay invoices at designated times of the year.

 

However, even though late payments are the fault of customers, the study indicates business owners could do more to chase payments. Twenty-nine percent say they don't do so for fear of ruining customer relationships, while 9% lack a dedicated resource and 8% the time to chase payments.

 

So how can you address late payments without tarnishing your customer relationships? Here are five tips to help prevent late payments:

 

#1 Create clear and concise payment plans

 

Clearly outlining your payment terms at the start of the customer relationship, rather than once an issue arises, can significantly increase the chances of receiving payment sooner.

 

Make sure your customers completely understand your payment procedures. Provide clear and concise invoices which state the payment due date, along with late payment consequences.

 

The possibility of incurring late payment fees can make customers wary of paying late. This along with providing clear guidelines for payment helps manage your customers' expectations and gives them enough time to get money together to pay the bill.

 

#2 Make it easier for customers to pay on time

 

Automated digital payment methods, like direct debit or e-invoicing, are a great way to ensure payments land in your account as soon as possible.

 

E-invoicing helps ensure making payment is as easy as possible for customers. Made possible with online accounting software like Sage Business Cloud Accounting, e-invoicing also helps reduce the paperwork and admin associated with traditional payment methods.

 

Using digital methods can eliminate the constant chasing and awkward chats about overdue payment. They are quick and easy to set up and manage, plus when used with cloud accounting software, they can help you monitor your business's cash flow.

 

#3 Foster the right relationships

 

Find out who at your customer's end oversees receiving and paying invoices. Building a positive relationship with this person or team will increase your chances of getting invoices paid on time through weekly chats and constant updates.

 

#4 Make time for invoicing

 

Getting customers to pay on time is a two-way street – you and your customers need to work together. Your system for invoicing and accounting is just as important as any other part of your business. Ensure you have a designated team or person overseeing customer payments and invoicing procedures. To make the process more efficient, consider digital payment methods like e-invoicing.

 

#5 Offer early payment incentives

 

There's nothing like being rewarded for doing the right thing. One way to encourage on-time payments is to offer incentives, for example, a discount for early payment. Make sure incentives are clearly stated on your invoices and if possible, draw your customer's attention to them verbally.

 

Author Bio

 

Sage (FTSE: SGE) is the global market leader for technology that helps businesses of all sizes manage everything from money to people – whether they're a start-up, scale-up or enterprise.

Our mission is to free business builders from the burden of admin, so they can spend more time doing what they love. http://www.sage.com/au        

1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...

Leave a Reply

Your email address will not be published. Required fields are marked *

Top Rated Articles

How your company can adapt to the Digital Revolution

Over the last couple of years, technological innovation has brought about a rapid change in the customer service landsca

LEARN MORE

Will Marketing Automation Help Your Business Grow?

Marketing automation software can benefit your business in a number of ways. It is a great way to increase traffic, enco

LEARN MORE

How CRM Can Maximize Customer Lifetime Value (CLV)

"Keep your customers always on the frontline," this is a key philosophy to running a successful business. Customers are

LEARN MORE

Recently Viewed

How I changed my Facebook Business Page Name

I started a Facebook page for my business many years ago. I had spent thousands of dollars running ad campaigns and gain

LEARN MORE

Scratch me Happy…

  Today, walking to the local café at lunch I passed a young woman sitting on the grass using a coin to scratch

LEARN MORE

Why It's Important To Focus On The Financial Aspect of Your Business

It's not uncommon to hear people say - "I'm not really good with money". If you have been that person and used this expr

LEARN MORE
  • Over the past 6 months the incredible team at MMP have supported us to shift our attitude towards our business & month on month our revenue is increasing to the point we will be able to employ additional staff to support our business goals long into the future. Do not regret our decision one single bit!

    • Emma Reece

  • Working with my coach has enabled me to see the areas where my business is failing. This was pretty confronting to me to be honest. MMP has the tools to improve these areas and the guidance on how to implement them.

    • Sharon Robinson

  • I have been working with Max My Profit for approx 3 years now, and over that time I have learnt a lot of things about not only what it takes to run a business, but I have also learnt things about myself. I don't believe i'd be the person or have the business I have today if it wasn't for Max My Profit and our Business Excelerator. Great team to work with if you want to take your business serious!

    • Ben Choy

  • As a new client for Max My Profit (MMP) it has taken no time at all to realise the benefits of business coaching. Despite many years of senior management experience starting a new business requires best practice systems and processes built on a solid platform of detailed planning. I look forward to the benefits of adopting the formula being shared by MMP.

    • Campbell MacLeod

  • Max My Profit Are truly awesome at what they do. They have helped me over the past 12 months to get off the tools in my business and start working on my business. I am looking forward to 2019 with enthusiasm not concern. Thanks so much.

    • Aaron Kemp

  • If you are committed to Growth the Max My Profit Team has the tools and expertise to excelerate all areas of your life. They Care, They Listen, They Understand You as an Individual first then they focus on Your business. Thank you Max My Profit my rating is a 6/5 - Kindest Regards The Mr Handyfix Team

    • Catherine Kavadas

  • The team at Max My Profit are an absolute pleasure to deal with. I love working with a team who is on top of what they are doing and have a clear view of what they are working on with you and helping ensure you get to the end goal.

    • Lauren Watts

  • I have been working with MaxMyProfit over the years and what they do for SME's in growing their business is fantastic. Also due to there knowledge and their supporting material for companies across the 5 lifestyle stages and assisting them through this process day in day out is extremely comforting as a small business owner and have referred them many businesses over the years.

    • Steve Laingy

  • Working with a business coach from MaxMyProfit has been one of the best things I have done for my business. I had several other coaches before MaxMyProfit but these guys are a step above the others. I have seen a significant increase in sales, now have a business that can run itself and the coaching program has paid for itself many times over.

    • Matthew Kitchin

  • Much more than just business coaches. There is an absolute treasure chest of business knowledge in their members site.

    • Iain Campbell

  • Max My Profit are unique as they really partner with you to develop and implement a plan that will drive success for the business. I was hesitant to proceed as previous business coaches tell you what to do and rely on you to implement.

    • Michael de Haan

  • I attended one of Max My Profits introductory events in Melbourne. Having been an accountant for almost 30 years, I was somewhat sceptical. Boy was I wrong. I not only enjoyed the presentation, but I gleaned so much from just that session.

    • Daniel Odd

  • These guys are an absolute wealth of knowledge for Small Business. The programme and support networks they have set up ensure learn more every day and can take your business from good to great. Thanks so much.

    • John Butler