Their behaviour isn’t unusualYet Holland and Barrett?s behaviour is not at odds with business practice nationwide. According to the Federation of Small Businesses (FSB), around four in five businesses have been paid late, the impact of which is far-reaching.
In his Spring Statement to Parliament, the Chancellor, Phillip Hammond announced plans to ?tackle the scourge of late payments? by large corporations to their smaller suppliers.Promising a ?brighter future?? for the UK?s 5.6 million small businesses, he outlined a requirement for big companies to review their payment practices and report on how they?re paying the suppliers.
Businesses need to reduce the risks ? nowWith late payments resulting in the closure of more than 50,000 small businesses each year, at a cost of an estimated ?2.5 billion to the UK economy, Mr Hammond?s announcement could not have come at a better time. As welcome as these new regulations are, no timeframe has yet been announced for their consultation and implementation. Until they?re finally enforced, there are steps that small businesses can take now to help reduce the risk of late payment:
1. Make it digital!Almost everything is digital today. Therefore there is no reason why your business invoicing should be an exception. Sending an invoice via email will allow for faster processing than if it were sent through the post.
2. Consider some basic invoicing softwareA spreadsheet application such as Microsoft Excel, for example, might suffice if your business is in its early stages. Although dedicated invoicing software is likely to become necessary as you grow. Many software vendors will offer a free solution. But it?s worth noting that it might not feature advanced options such as drag-and-drop templates for different scenarios, or the automatic calculation of VAT and other taxes.
3. Simplify your softwareGiven how complex running a business can be, it’s worthwhile trying to find software or service providers that can perform multiple functions. For example, having the ability to match incoming payments to invoices sent, send reminders, attach documents such as contracts, and create multiple and/or recurring invoices in one solution. This will be much easier than managing several systems.
4. Protect that payment!Including the necessary company and financial information will provide clarity to both parties. Ensuring that no misunderstandings can take place will reduce the likelihood of any queries occurring once an invoice has been raised. At the minimum, your invoice should include information on: the freelance services that were provided, how much the customer owes (tax included), and other information such as billing addresses. A detailed delivery note can also serve as a clear form of communication should a dispute arise over any charges. One thing that should always be included is payment terms. Remember: cash flow is king. Set strict payment terms, and ensure you enforce them.
5. Is your invoice as professional as it could be?Your invoices and receipts should be uncluttered and easy to read. You should take time to check that these documents are easily read on a wide range of mobile devices in order to make the payment process as frictionless as possible. You also shouldn?t assume your client?s payment method of choice. Although many may opt for bank transfers, some may prefer credit or debit card. Try to offer alternative methods of payment wherever practical.
As it stands, large companies – such as Holland & Barrett – do consistently have a habit of paying late, harming small businesses and in turn the wider economy.By the Government recognising the scale of the problem and taking steps to address it, more awareness and urgency will be brought to this important issue. But until measures are implemented, business owners can improve their own situation through the use of clear and accurate documentation, quickly and seamlessly delivered. ? After all, as a nation of small businesses, it’s in everyone?s interest to tackle this situation.
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