Calling and chasing late payments is never the most comfortable part of a business but getting paid late – or not at all – will have a huge impact on a business’ ability to recover from this unprecedented time. It is more important than ever that you balance forbearance with recovering overdue payments.

Here we look at six effective ways to recover overdue amounts and discourage it happening again in the future.

1. Missing information is the number one reason that invoices don’t get paid. Make sure that your invoice contains the relevant information – date, invoice number, PO number if this is applicable, and a breakdown of VAT charges and final figure.  Include a clear description of goods. Make sure that the invoice states clearly your payment terms (usually 14 – 30 days) and bank details to facilitate BACS payments. Consider including in a reminder that interest will be added to late payment. For more information on how this works, click here

2. Is your invoice going to the right person? With seven out of 10 UK businesses furloughing staff, it is likely that the person that you usually send your invoices to isn’t working. Of if they are but are working from home, perhaps their contact details have changed. Call the offices directly, rather than emailing, and find out where you should be sending invoices and who is responsible for making sure that they get paid on time.

3. Don’t be afraid to chase when an invoice is late. It can be awkward to have a conversation around unpaid invoices, especially with a usually good client who might be experiencing tough times due to Covid-19. Whilst forbearance is absolutely needed during this time, we need to balance this with the reality that money coming into your business will affect how your ability survive the pandemic. These conversations are much better on the phone, rather than by email where much can be misinterpreted. If you really struggle with these conversations, consider explaining that your accountant is putting pressure on you or set up automated reminders via an invoicing app. But really, we can’t stress this enough: make the call.

4. Don’t spend too much time chasing an invoice. Work out how much of your time you spend chasing invoices and late payers and then work out if this time could be better spent elsewhere in your business. Set a limit of the number of approaches you will make – perhaps two reminders – and then move to the next stage of your late payment recovery strategy.

5. Work with a debt recovery firm. We often hear of businesses contacting a solicitor to issue a late payment letter. The trouble with this is that you already incur a fee before the letter has even been received by your customer with absolutely no guarantee that payment will be forthcoming. To prevent throwing good money after bad, speak to a reputable debt recovery agency who works on a no collect, no fee agreement which means that if they don’t succeed in recovering overdue amounts, then you will not be charged. On collection of monies there is usually a small percentage payable to the agency, or they can collect their fee from the client who owed the money in the first place. This is done through the Late Payment Act. A  good debt recovery agency will be able to talk you through your options.

6. Prevent it happening again. Moving forwards it is best to have a thorough understanding of a customer’s payment behaviour before extending credit. identeco’s Business Support Toolkit provides insights into 15m UK companies and businesses providing a clear financial health rating to show how stable that business is, as well as how regularly they pay their invoices. With a £79.95 subscription to identeco, you can also add your customers to an account monitoring service which will alert you to any drops in financial stability meaning that you can act quickly should something look irregular.

identeco provides business data, solutions, and support to SMEs through its Business Support Toolkit. An annual subscription is £79.95 + VAT and includes 10 services that will help you protect and grow your business. To understand more or request a free trial, call 01527 386 607 or visit our website