How to deal with unpaid invoices

A vast number of small businesses across the UK are having to deal with unpaid invoices on a daily basis as they struggle to stay afloat amid a rising trend in late payments.

Payments to small businesses were made on average 8.2 days late in September. This is the highest late payment time since August 2020, according to new data from Xero, the global small business platform. As well as this, research completed by Barclays found that 58% of SMEs are currently waiting on money tied up in unpaid invoices.

Growing impact on small businesses

Rather than just being a small inconvenience for businesses, late payments have become such a problem that they can be the difference between being a successful company and going bust.

Having to deal with unpaid invoices put stress on owners who need the money to keep their business going, causing them to make sacrifices in order to survive – with 22% of small businesses having to make staff redundant due to money being received too late or not at all.

Some business owners are also resorting to measures such as reducing overhead costs by downsizing office space or cutting team social spending budgets – all in order to pay company bills, which have also recently skyrocketed due to inflation.

Dealing with debtors and chasing up invoices when not paid also uses up valuable time and resources that could be used elsewhere to grow businesses.

Checkapayer co-founder Chris Hooper commented: “It is unfair and morally wrong that businesses, which people have spent unimaginable amounts of time and effort establishing, could effectively be forced into folding due to funding they are owed not arriving on time.”

What you can do to protect your business

Despite late payments being a massive threat to numerous businesses, there are some steps small firms can take to increase their chances of being paid and to chase down late payments.

Six top tips for small business owners:

1. Get invoices to your clients as soon as possible:

Invoices are a priority so sending your invoice to suppliers late will suggest a lack of urgency in terms of getting your money – so don’t delay on sending your invoices out.

• Keep payment terms short:

Be realistic with your invoice timings but also set payment deadlines shorter than when you really need to receive the money, giving yourself a comfort zone by taking pressure of your cash flow.

• Get to know your client:

Building up good relationships with clients could mean they are more receptive to working with you meet your payment-term needs.

• Monitor consistently late payers:

When managing cash flow, it is important to identify likely bad payers and avoid working with them in the future if necessary.

• Send regular reminders:

Sometimes payments may be missed by genuine error or problems with technology, so it is always a good idea to message the client before jumping to any conclusions.

• Research your customers:

Checking a client’s credit history or payments record – through sites such as checkapayer.com – to see if they have made late payments before could give you a heads up on any possible problems before it starts to cost your business financially.