Moorfields investigate the best way to tackle late payments from customers
Prompt payment is one of the most frustrating issues that SMEs across the UK are forced to deal with on a daily basis.
Late-paying clients will often provide a dazzling variety of excuses as to why they cannot pay on time, and the coalition government has attempted to deal with the problem by introducing the EU late payment directive.
This stipulates that B2B payments cannot exceed 60 days before they are paid, but in many cases this may even be too long for a struggling business to wait.
So, what measures can companies introduce to try and deal with the problem?
Suspend customer credit
A line of customer credit is not unusual for companies of all sizes who have valued clients that they are keen to facilitate in any way they can. However, it is important that these clients do not cross the line at any point in terms of abusing their position. By threatening to suspend the credit line to a serial late-paying customer, you may be able to convince them to change their ways.
Withdraw discount option
Many companies will offer their clients a potential bonus if they purchase products in bulk or even if they simply use your service on a regular basis. Threatening to withdraw this option for a client who is frequently identified as a late payer may serve to motivate them in the future, hopefully meaning that you get paid on time.
Getting the solicitors involved
Writing to clients to ‘remind’ them of their payment responsibilities is common practice for many SMEs, and it can sometimes be a highly effective tool. However, hinting that you are planning to involve the solicitors within such a letter, you are proving how serious you are about retrieving the necessary payment and it might just be the ideal way to set an important precedent.
Contacting an insolvency specialist
A restructuring and insolvency advice specialist can assist business leaders, financial directors and stakeholders to deliver practical and sustainable solutions for their business. They can also offer insightful advice regarding how to proceed in the future.