Paym’s Neil Aitken shares his top tips for getting paid on time.
If you run your own business, you’ll know that there’s enough to worry about without having to chase payments. Setting up a small electrical business from scratch is no easy feat. As well as covering tool and machinery costs and paying salaries, getting your business up and running requires a lot of blood, sweat and tears.
There is undoubtedly strong demand for electrical work covering small to medium sized jobs at the moment – our research found that nearly half (42%) of people we surveyed spent more than £500 on construction last year. But could your customers actually be costing you more money in the long run?
Our research reveals that sole traders, including electricians, are typically left chasing up an average of £208 each month in late payments. This represents a fifth of total monthly income. As a result, nearly a quarter (23%) have given up chasing a payment altogether – putting a heavy amount of hard-earned income to waste.
Working in different locations across different sites, it’s likely your customers often pay you cash-in-hand. But even on a small scale, getting paid late severely dents your business’ cash flow, restricting your opportunities. In the long-term it can substantially inhibit growth.
“Our research reveals that sole traders, including electricians, are typically left chasing up an average of £208 each month in late payments.”
Laying down the foundations for a healthy customer relationship in the beginning can help you to ensure you get paid on time.
Set your terms up front
A simple set of terms and conditions should always be written down, outlining your service level agreements, standard invoicing process, refund policy, and payment terms. Setting the expectations at the beginning can help to manage customers if issues around payments set in. Don’t commence work unless you’ve received confirmation of acceptance of these terms.
Reward good behaviour
Offering a discount for early payment, or setting up a rewards scheme, will encourage customers to pay on time. Not to mention incentivise customers to do more business with you!
Punish bad habits
If persistent late payment is an issue for your business, you can consider imposing penalty fees on late payments – provided you have set the out in advance.
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.
Remember, it’s to their advantage
Customers that don’t pay on time pose problems for other customers. A stinted cash flow means you can’t pay suppliers or purchase essential kit, which disrupts other jobs. Reminding a slow-to-pay customer of the knock-on effect can help to motivate good behaviour.
Choices beat excuses
A mobile phone is crucial to run a business – and Paym means you can use it to get paid straight to your bank account using your mobile number. Paym is offered by 17 banks and building societies, covering more than 9 out of 10 current accounts, so it’s one of the best ways to get customers to ditch ‘no cash’ excuses. All your customer needs is their standard bank app – so it’s secure for them and fast for you.