How to get money out of clients?

[955i]

Hi all, I know there are a few people with their own businesses on here so wondered if I could pick your brains on this one.

 

As a new business I have picked up some clients who have the potential to provide a healthy amount of repeat work.

 

However, these are fairly large companies who don't seem to get that my mortgage payments depend on their invoices being paid on time and have yet to meet an invoice deadline!

 

I don't want to hassle them too much about it as then they could just take the work elsewhere, so how do people go about getting overdue payments without irritating the client?

 

Also, I know there is the legal interest rate that you can charge on overdue debts, but this is not even worth charging.

 

If you write into the terms and conditions that an extra charge of say 10% of the total per week will be levied on overdue payments would it actually be legal to do this?

 

Ta

[al4x]

personally I haven't gone down the late payment of debt as its just not been worthwhile and enforcing it does tend to loose you goodwill and customers. But if you're dealing with large customers then they can be infuriating and actually we stopped trading with Network Rail as it was getting far too hard to get paid. You have to remember accounts departments are usually very different to where the work comes from so you can pester them and make sure you statement them once a month. If they push it too far then www.thomashiggins.co.uk is worth signing up to as legal letters are £2 plus vat and usually work, if not don't be scared to go down the small claims route as one thing I've learnt is do it at the first sign of trouble and you stand a chance of getting money back, leave it too late and you just join a queue and don't get anything. The other thing I've learnt is work isn'tworth doing if you don't get paid for it so don't let credit go silly

[MC]

I find you need to be on the ball, make your payment terms strictly 7 days and chase them on the 8th. Most companies I work for are good but there is the odd one who won't pay until they have been chased 3 or 4 times. The hourly rate I charge them is 25% higher than my normal one to pay me for the grief.

[955i]

make your payment terms strictly 7 days and chase them on the 8th.

 

We work to an invoice period of 14 days (individuals and small companies) or 30 days for the larger companies/sub-contract work.

 

This just makes it more frustrating really as a month is plenty of time to sort it out in my eyes

[ME]

I get my missus to chase our debts and blame our "accounts lady" if anyone complains that she chases them too much. We put clients with overdue accounts on "credit stop". This normally means that the person that wants the work done tells the accounts department to pay.

 

If you really need the clients then arrange to pay them a visit, talk to them about your business & find out more about what they do. Whilst you are there tell them that you are a small business and ask if you can be added to a priority payment list or find out if you can provide references or purchase order numbers on your invoices that might speed up payment. People like the personal touch, visiting them will be more productive in the long run that a solicitors letter.

 

You have not physically made the money until it is in your bank account, profit on a spreadsheet is no good to anyone. Load the profit margin on constant bad payers and they will either go elsewhere or it will make the grief more bearable.

[al4x]

In my experience you get the good and the bad, we have legal companies that pay by return post and then other large companies it takes 90 days to drag the money out of them. Unfortunately in our game 30 days is the minimum people expect and even then its usually month after month of invoicing. Its frustrating but the way things are all you can do is stay on peoples backs and you'll soon want to start punching the ones who keep denying invoices have arrived and asking for copies

[ME]

and you'll soon want to start punching the ones who keep denying invoices have arrived and asking for copies

 

 

We stopped posting out invoices about 2 years ago. We email all our invoices to the person that booked the job. It not only saves on postage but we get a lot less invoices going "missing".

[MC]

I have also found that making yourself a flask of coffee and going and sitting in their office until you get a cheque works. Go there about 4PM and park so noone can get out.

[ME]

Obviously the "doggie truffles in a jiffy bag" are also there as a last resort too....

[al4x]

I have in the past held goods now that gets peoples attention fast, stopping accounts is ok as long as they sort it out and don't start using someone else in the meantime. I've a company of solicitors based in Norfolk that go on stop once every two months without fail as the only way to get the money. Thats an inept accounts dept who pay over the phone when it happens no amount of sorting out seems to help.

[snozzer]

When you send invoices, email them with a delivery and read receipt, then email them the next day and ask them did the get the invoice and is everything correct on it. This helps the no record of invoice and the "discrepancy on invoice" lines.

 

Then on payment date -1 send "AUTOMATED EMAIL FROM ACCOUNTS" email reminding them of payment due tomorrow.

[Paul223]

Have you understood their payment terms? some companies will only recognise an invoice say on the 4th of the month, that then gets paid on the 28th of the month, if your invoice arrives on the 5th your screwed till the end of the following month

 

Larger companies can be more difficult but once your into the swing of things it all evens out.

 

Have a word and explain that your only just starting out and that cash flow is essential, ask them what they can do to help, billing wise

Edited May 24, 2010 by Paul223

[Cranfield]

I always considered this a form of bullying, its often your biggest and most important customers that do this and they of course, owe the most money.

You are apprehensive of being too aggressive, as you don't want to lose the business, but in my experience a personal visit to the person you "sold" the goods to often helps.

 

We put the MoD on "stop" when their account reached 6 digits overdue and there was an almighty fuss, but they cleared it within 7 days and were never overdue again.

We did enjoy "favoured supplier" status with them, so it was not too great a risk.

[whiskymac]

Struggle with this myself at times, and it's much worse the last 18 months. People get work done so clearly have the money, they just don't seem to want to part with it when it comes time to pay the piper. Even work done as a subcontractor seems to take forever to get paid........which is the same problem....main contractor is struggling to get paid from customers so everyone has to wait.

[955i]

It wouldn't matter so much but I have just reached the 'flip-flop' stage on having the last money from my old employer (end March to carry us through April) and waiting for the money from my April work to pay this months bills (bit tight as we are in the last week!!).

 

I knew I would have a month like this when we started and once these are paid then I will be back to being a month ahead, just not sure the mortgage people will look on it kindly

[RC45]

Most small businesses go into liquidation due to cashflow problems, usually caused by customers not paying their invoices on time. I know, I suffered the same problem early last year. A friend of mine had a business fold on him due to the same problem.

 

Good luck, I hope you resolve your problem soon.

 

Phil

[KFC]

I know it depends very much on the type of product/service that you provide and it also depends on whether your profit margins can stand the extra burden but Invoice Factoring can work for some companies.

 

In other words, a factoring company will pay you the equivalent of your monthly invoices, less a percentage, each month to ease your cash flow.

 

Never used it myself but I did know one company who used it to good effect. They were a CNC Precision Machining company with regular monthly orders.

[Raja Clavata]

It's not right but I know that getting payment out of the company i work for in anything less than 90 days is a minor miracle.

 

My advice would be to try and get a mixture of clients to alleviate the issues of dealing with big firms. When dealing with big firms I think it's really a case of just accepting it, hassling is fine but it takes a lot of effort to get in our supply base and only one slip up to drop out of it for good (or at least a very long time).

 

Adding a premium is of course an option to but go too far and there'll always be someone else in the supply chain ready to under-cut you.

 

So I think key thing is avoiding all eggs in the same basket which is sound business practice anyway.

[al4x]

yup and remember there is a big defference between won't pay and can't pay keep your eyes open at all times. Its worth investing in creditchecking and monitoring as it can highlight issues particularly with new customers who have run out of credit with whoever else they are using and don't be scared to put people on stop. We were in the early days and it just meant we did another 5K of work for a company before they went tits up on us.

[ME]

Its worth investing in creditchecking and monitoring as it can highlight issues particularly with new customers who have run out of credit

 

Sound advice. We use Creditsafe. The ones with the flashiest websites, flashiest cars etc are normally the ones with no money !

 

We also request that a new customer pays for the first order immediately against proforma. This again is a good gauge, the ones that bitch and moan or dont want to do it are the ones that were going to be a nightmare or not pay you anyway !

[Flashman]

Consider credit insurance or non-recourse factoring. It will reduce your income but will offer greater certainty.

[Bigweed]

Send in "The Boys" !!!

[al4x]

Sound advice. We use Creditsafe. The ones with the flashiest websites, flashiest cars etc are normally the ones with no money !

 

We used to but they are absolute ******* and I changed, I think they are getting better but their old auto renewal process upset a lot of people. Tried to stitch me up with it and only got out of it after going through the data protection request asking for recordings of the 3 times I'd said we weren't renewing

[gyp]

I offer a 2.5% discount for payment within 14days. If you arange this with the customers accounts department direct rather than with the contracts manager (and email accounts an invoice) you will be amazed at how quick payment gets made.

[canthitathing]

I find you need to be on the ball, make your payment terms strictly 7 days and chase them on the 8th. Most companies I work for are good but there is the odd one who won't pay until they have been chased 3 or 4 times. The hourly rate I charge them is 25% higher than my normal one to pay me for the grief.

 

 

I get my missus to chase our debts and blame our "accounts lady" if anyone complains that she chases them too much. We put clients with overdue accounts on "credit stop". This normally means that the person that wants the work done tells the accounts department to pay.

 

If you really need the clients then arrange to pay them a visit, talk to them about your business & find out more about what they do. Whilst you are there tell them that you are a small business and ask if you can be added to a priority payment list or find out if you can provide references or purchase order numbers on your invoices that might speed up payment. People like the personal touch, visiting them will be more productive in the long run that a solicitors letter.

 

You have not physically made the money until it is in your bank account, profit on a spreadsheet is no good to anyone. Load the profit margin on constant bad payers and they will either go elsewhere or it will make the grief more bearable.

 

 

Both great advice.

I have ditched a number of customers who have a habit of dragging out payment, 120 days in some cases. Sometimes you have to weigh up whether your time would be better spent looking for additional customers rather than flogging the current dead horse. If you operate out of an overdraft, the late payment will cost you dearly, eating huge chunks of your profits.

 

Best of luck anyway . I've been self employed for 21 years now and wouldn't have it any other way.