Are you struggling to get faster payments for your small business? Although this may seem like the norm for small businesses, late payments can put you in danger, especially during a recession.
The UK is officially in a recession for the first time in a decade, causing consumer prices and taxes to go up. As a result, 40% of workers in the UK are looking for side hustles to increase their income during these tough economic times. Unfortunately, it can be tough to make an extra £1000 a month when your clients fail to pay for your products and services on time.
The good news is that there are plenty of ways to get faster payments without risking your relationship with your small business clients. To score faster payments, here’s what you should do:
1. Request for an Upfront Deposit
Deposits are usually implemented by freelancers and small business owners working on large projects. However, you may also consider asking for a deposit, especially if it helps with your business’s cash flow.
The BBC points out that pubs, restaurants, and other small businesses are implementing deposits to protect the owners and the business from losing income. While many owners were hesitant to charge deposits, they discovered that their enterprise had a better customer turnout due to the scheme. Likewise, you can ask for a deposit from your clients to help protect yourself against delayed payments. You may even be surprised to discover that your clients are making faster payments thanks to these deposits.
2. Improve Your Invoice Approach
Your invoice strategy can help you acquire faster payments from your clients. As such, you must ensure that your invoice is professional, easy to understand, and aligned with your contractual agreements.
Small business owners may find it hard to keep track of these invoices, which is why it’s recommended to use accounting software programmes that can handle financial processes. These software programmes can automate your invoicing and billing processes to speed up transactions between you and your clients. This software programme will help you save time and money in managing invoices and make it easier to get faster client payments.
3. Present Easier Payment Types
Your clients may struggle to pay you on time because your small business doesn’t support their preferred payment method. So if you want to get faster payments, you have to be able to offer multiple payment methods to satisfy clients with different preferences.
You can maintain more clients and speed up their payments with the help of mobile card readers that support contactless payments as well as debit and credit cards. These devices can handle transactions through Apple Pay, Android Pay, and Samsung Pay because they can easily connect to your small business through Bluetooth or Wi-Fi. By widening your clients’ options, they won’t need to delay their transactions to adjust to your supported methods.
4. Start Charging Late Fees
If your clients continue to delay their payments, consider charging a late fee for your invoice. Just ensure you’ll communicate the terms properly to avoid destroying your working relationship with current clients and future consumers.
While this may sound like an extreme move, the Late Payment of Commercial Debt Act has been around since 1988 and was even amended in 2022 to reduce the negative impact of late-paying customers. The government advises that your invoices should mention the late payment legislation and your terms for each late payment to keep your clients aware of the consequences. By following this strategy, your clients will more likely provide faster payments to avoid paying late fees.
You’ll have to work smarter, especially if you want to get faster payments from your clients. Thanks to these strategies, you can protect yourself from the recession and boost the cash flow of your small business.
Anna Yannick is a freelance writer who has been writing business articles for five years now. After working in the corporate world for a decade, she wanted to pursue her writing passion and share her knowledge through blog articles.