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4 tips for trading safely and getting paid on time

4 tips for trading safely and getting paid on time

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. 

1. Check their credit score before you start working with them

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.

  • Find out customers’ predicted financial health for the next 12 months.
  • Get a simple score between 1 and 5 (from good financial health to companies facing serious default). 
  • Scores are based on financial position, performance, directors, mortgages, business events, and more.
  • Hokodo’s credit scoring algorithms are continuously back-tested and enriched for maximum detail.

By developing good relationships with reliable clients, and ruling out riskier options, you’ll be able to trade more confidently in any sector. 

2. Choose shorter or more specific payment terms

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).

3. Actively chase invoices

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. 

  • Set up automatic reminders. Your invoicing or cash flow management software will remind clients a payment is due so you don’t have to.
  • Use a bookkeeper or accounts executive. Delegate invoicing to someone experienced. (Sometimes hearing directly from someone in accounts can make a big difference to payment speed.)
  • Be consistent with all reminders. If the payment deadline is in 30 days, the reminder should be sent out on day 30 or 31 - whichever you think will be most effective. That way, both you and your clients know exactly what’s expected and when.

4. Get invoice insurance

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!

Check your customers’ credit scores instantly.