SMEs up and down the country are dealing with late payments. According to Bacs Payment Schemes, “more than a third of SMEs...are waiting two months beyond agreed terms to be paid”, and it costs them £9,000 on average to recover costs themselves.
Whether you’ve been working with a client for years, or they’re brand new to the business, this is how to check out their financial health and get your invoices paid on time, every time.
Understanding your customers’ financial health is important - it tells you how likely they are to pay their bills in full and on time.
If you’re about to start working with a customer with a patchy credit history, it’s better to know before you invest time and resources. The first and easiest place to look is Companies House, where you can verify for free the basics of a Limited Company, including when they file their accounts, who’s making decisions, and more.
Check your customers out with Hokoscore
Find out more about your clients in seconds. With Hokoscore, you’ll get detailed credit scores and deep company insights for free.
By developing good relationships with reliable clients, and ruling out riskier options, you’ll be able to trade more confidently in any sector.
If a client only gets average scores with Hokoscore, that doesn’t mean you shouldn’t trade with them at all.
Shorter payment terms can help keep your cash flow healthy. Rather than stipulating a 30-60 day deadline, setting a shorter payment period of 1-2 weeks can help you encourage faster payment. In some sectors, it’s good practice to ask a client for an advance before starting any work.
Discounts for early payment can also incentivise clients to process invoices on time, as well as apply penalties and charges for late payment.
Helpful tip! Discuss payment terms with clients in advance so they’ll know what to expect. When it’s all in writing and everyone’s on the same page, it should be easier to get paid.
If your client insists on long payment terms, make sure you take out invoice protection (take a look at point 4 below).
Every SME needs a system for late payments. Without consistent reminders and processes, payments can take much longer to appear in your business account. There are some great platforms out there that will do the chasing and help you stay on top of your cash flow - our favourites include, Chaser, Futrli and Fluidly
Most clients need a reminder now and then, and it’s up to you (or your clever software) to do the reminding.
If one or more of your invoices are left unpaid, invoice insurance will make sure you still get your money. You’ll always get paid, even if a customer stops paying their creditors, or outright refuses to clear the invoice.
With Hokodo, your business can be covered for invoices up to £20,000 in seconds. (We can cover higher amounts too! Just ask.) If you claim, you’ll receive 90% of the value of the invoice. Hokodo’s policies are backed by Lloyd’s of London, the world’s specialist insurance market, so you can be sure your claim will be paid.
Getting paid should be easy. Hokodo insurance solutions have got you covered, so you can focus on what matters most - your business’ growth!