Getting customers to pay bills on time is not always straightforward. However you choose to go about this, whether you offer early payment discounts or are prepared to use more hard line tactics, it’s important that you keep on top of your invoice procedures. Late payment can slowly strangle a business through reduced cash flow – and a survey by credit checking agency Creditsafe has uncovered more information on the effectiveness of the different methods to avoid this problem.
500 senior company managers were interviewed, and of these 45% said they would pay a bill quicker if the supplier asked nicely. However, still more of them – around 48% – said they would pay faster if they were threatened with legal action. 58% would be motivated to pay faster by penalty clauses. This shows that using a variety of ways to speed payment is essential, and it might be necessary to wield both a stick and a carrot.
There were other threats that seemed to be less effective. Just 32% would be compelled to pay faster if the supplier claimed to cease trading with them without them speeding their payment policy. There were 10% of managers who said that nothing would make them pay faster, showing that late payment can be an intractable problem to solve. Indeed, a quarter of those interviewed admitted to stopping paying invoices at some point in the past year, no matter when the payment was due.
Late payment can be a hard problem to conquer, and if your business is having issues – no matter whether you use threats or ask nicely – invoice finance can help you to minimise the impact of the problem. By releasing up to 90% of the invoice value, you can free up cash flow no matter how long your customers take to pay. With this becoming such a big problem for all sorts of companies, it’s important to look into all your options in order to help your business keep afloat.