As a SME, you are at risk of late payments. Late payments aren’t always a huge problem for larger and more established businesses, as they have the resources and finances to cover the delay. However, SMEs rarely do. This is why it’s important to do everything you can as a business to avoid late payments from clients.
Avoid Late Payment Fees as a SME
Though it isn’t possible to completely avoid late payment fees as an SME, there are things you can do to encourage clients to pay on time. For example:
- Make it Easy for Clients to Pay – Thanks to modern technology and online banking, there’s no reason for making a payment to be difficult. The easier you make it for clients to pay, the less they will be put off from doing so. This reduces the chances of payments being late or forgotten about altogether. By offering a wide range of payment options, you are giving the client everything they need to make the payment in a way that’s convenient for them.
- Ask for a Deposit or Down Payment – A number of SMEs don’t ask clients for a down payment or deposit before they start work, assuming that this could cause a client to go elsewhere. However, there’s nothing wrong with asking for a deposit or down payment before going ahead with any work and it’s something that a lot of businesses do. Asking for a deposit or a down payment reduces the impact that a late payment has, as you’ll already have some of the total cost paid.
- Offer an Incentive for Paying Early – One way to encourage clients to pay on time, or even to pay early, is to offer them a reward for doing so. For example, you could offer them a discount on their next invoice. As well as being a great incentive to make a payment quickly, this also encourages the client to use your business again. After all, they’ll have a discount. You may also consider offering them the chance to pay a slightly lower amount if they pay before a certain date. Not only could this give them a much needed push to pay early, but it may also encourage them to prioritise the payment ahead of others.
- Have a Late Payment Fee in Place – As a business that’s offering a service, a late payment can be costly to you. Not only could you be faced with a cash flow problem, you may be forced to put other plans on hold until you have the finances available and you could be wasting valuable time by chasing the payment. This is why some SMEs have a late payment fee in place. A late payment fee goes some way towards covering the cost of the inconvenience, as well as discouraging clients from making a late payment. After all, a client is unlikely to want to pay more necessary.
Of course, any late payment fees or down payments must be set out in the signed contract between you and the client. This is something that Audley Chaucer can help with. To find out more about protecting yourself from late payments as a SME,get in touch.