The proportion of claims for late payment that include compensation has risen only marginally over the past two years, despite the late payment issues small and medium-sized firms are reported to be facing.
In 2010, just 25% of claims we (Lovetts Plc) handled included compensation. This rose to 27% in 2011 and 31% in 2012. From the start of 2013, 33% of claims have included compensation.
While we welcome the slight uplift, we believes that many SMEs are missing out on the opportunity to claim compensation because they haven’t laid down any firm ground rules at the outset of new business relationships. We’re urging businesses to take a tough line on late payment and if necessary use the legislation already available to them.
Here’s our 10-point action plan for tackling late payment:
1. At the outset, make sure the customer understands that legitimate costs, compensation and interest will be claimed if late payment occurs. State it clearly in your T&Cs.
2. Don’t be afraid; make sure they understand very clearly that this will form the basis of your trading relationship. Having done this…
3. Invoice promptly and in the same month call or email to check the right person has received the invoice.
4. Focus on the usual suspects.
5. As soon as the invoice becomes overdue, call the customer to remind them that late payment compensation and interest are due on each invoice. Tell them the cost they could incur if they don’t pay.
6. Make no bones about the fact these will be claimed if it goes to legal, then dangle a carrot and offer to waive compensation if immediate payment is made.
7. If it helps, explain that compensation is to pay the costs of running a credit control team.
8. If payment isn’t made, warn of the additional recovery and/or legal costs that will be due in addition to late payment compensation.
9. Go legal when you say you will. If you don’t act on your threat your invoices will always remain at the bottom of the pile.
10. Act decisively and it will change your business culture and your customer relationships while reducing late payment for your business.
We’re urging urge small and medium-sized firms to address the issue of payment very early on, as new relationship with new customers are established. Don’t let it become the elephant in the room.
Blog supplied by Lovetts Plc.