5 top tips for small businesses tackling late payments
Health food giant Holland & Barrett has been consistently paying suppliers late. This comes after a tech consultancy filed a complaint with the watchdog after not receiving a 15, 000 payment for SEO services.
In Holland & Barrett’s payment practice reporting data, the commissioner discovered the company took an average of 68 days to pay suppliers. In 60% of cases, the invoices were not paid on the agreed terms.
Their behaviour isn’t unusual
Yet 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 now
With 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 software
A 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 software
Given 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.
Holvi CEO Antti-Jussi Suominen is a senior executive with previous track record in driving new business growth in both B2C and B2B environments in companies such as Sonera, Nokia and Elisa.
He has extensive general management experience in building and running new businesses and innovation in the mobile and online services domains in both corporate and startup environments.
Antti-Jussi's background in different industries, most recently in online games and mobile commerce, plays an essential role in accelerating Holvi's transition from a fast-growing fintech company to an even more customer-centric online service.