UK sole traders are owed an average of £200 each month in late payments. So how do you combat the increasing likelihood of a business cash drought? Paym’s Neil Aitken shares his top tips for getting paid on time.
As a business owner or sole trader, it’s likely that some of your clients pay in cash for the sake of ease, however research from Paym reveals that the average sole trader can be left chasing up to £208 each month in late payments.
This can be almost a fifth of the average trader’s monthly income, revealing the true cost of clients who are short of cash. As a result, almost one in four (23%) sole traders have given up chasing a payment altogether – forcing them to deal with unpaid work.
Customers who are slow to pay are bad for business. At any stage in a business, being held back by lack of funding can cause serious ramifications for your business plan, and can dent cash flow significantly.
The good news is that there are a number of simple steps you can take to ensure your customers pay you in full and on time:
- Get your T&Cs in writing
By ensuring you’ve made it clear from the start the amount and date you expect to get paid, you can minimise the room for misunderstandings and in turn, confusion over payments. This can also give you the chance to iron out any concerns or issues before you’ve started the work, meaning you and your customer both know what to expect from start to finish.
For ultimate peace of mind, get a written contract signed by both parties, as this will support you legally if a situation escalates to the Small Claims Court.
- Deter late payers
While a strong relationship with your client base is paramount to the success of your business, so is ensuring you have enough money in the bank to take on your next project. By charging customers who pay late, you give them a financial incentive to pay on time and reinforce that late payments are not the norm.
Payments that are less than £1,000 can be charged £40 in late fees and payments of £10,000 or less can be charged £70 in line with the Late Payment of Commercial Debts Regulations 2002.
- Don’t work for free!
As a business owner, you need to make sure that you have enough accessible cash to continue taking on projects. If delays in payment are set to cause you issues – then don’t be made to feel guilty of chasing your payments because customers are struggling to pay.
Adopt the attitude of a bigger business, and set rules for payment to ensure that customers don’t try to take advantage of your smaller business size.
- Take advantage of tech
Smartphone technology is moving at such a pace that it’s becoming increasingly possible for you to run your business at the touch of a screen. It also costs much less than you may initially think, with some apps as little as a few pounds, and others completely free.
If you choose to get paid using your mobile phone, you could save yourself the hassle of chasing customers who use the ‘no cash’ excuse when it comes to paying for your services.
Paym is also a quick and easy way for consumers to transfer money using just your mobile phone number, without compromising on safety and security. The payment service, which works with 90% of the UK’s banks and building societies, is designed to help customers pay small businesses owners who regularly get paid in cash. Customers can pay their trader in seconds.
By taking steps to help tackle the financial burden of slow or missing payments, you can ensure that your business is ticking along as it should be, with one less thing to worry about.