FINANCE AND BUSINESS
How to combat the late
Unfortunately, late payment continues to be a problem in the construction industry. Lee Murphy, founder of
Pandle, the cloud bookkeeping software, designed specifically for small businesses and the self-employed,
talks to RCI about how there are online tools available to support you
It is an all too common story among
roofers: upon completion of a job to a
high standard you send out an invoice,
only for it to be left unpaid, perhaps for
months. While you wait for customers to
pay up, your own bills start mounting,
creating cash-flow problems that could
threaten the success of your business.
If you have had experience with
late payers, private or commercial, you
are not alone. The Federation of Small
Businesses estimates that 50,000 small
businesses are forced to close every year
– such is the effect of unpaid bills.
While there are government and
industry-wide initiatives to encourage
prompt payments, by getting to grips
with your finances, there is much you
can do to help yourself. By managing
your customers in subtle ways, such as
sending payment reminder notices, you
can make a significant difference to the
health of your company finances.
I’ve drawn up a list of strategies that
will help you encourage customers to
pay up and on time.
Be clear about your payment
It is essential that you are clear and
up-front about your payments policy. It
will be the same for everyone, so include
a standard note on your estimates, or a
link to an online page.
If you send a letter of appointment
agreeing to work. Can you afford to
wait 66 days for payment? And what
impact will it have on your ability to
move on to the next job? Most businesses
that go insolvent are profitable, they just
don’t have the money in the bank to pay
the bills. If the payment terms are bad
and will put you under pressure, think
about whether it is worth the risk.
Not all late payments are deliberate.
Sometimes customers simply forget, or
the bill has been passed to the wrong
person. It is up to you to keep track of
who owes you what and when, and that
can be tough after a long day.
The good news is there are plenty of
online tools available to support you in
your efforts, many of which, come free of
charge. Pandle can automate the process
of chasing and reminding customers
for you, something that will have an
immediate impact on reducing the
number of debtors you have.
Invoicing customers and making sure
they have all the information needed to
be able to pay you is a no-brainer.
What if the customer still
If you have people who won’t pay, then
lots of phone calls and emails are the
starting point –and clearly turning up at
their house for domestic clients
You may want to refuse any future
work until the bill is settled. After that,
it is legal channels, which sadly can be
slow moving and involve more cost.
Remember to stay professional.
You trade on your reputation, so being
confrontational with customers could be
damaging as well as aggravating for you.
Making sure you get paid on time is
essential for the success of your business.
By automating the system with the
cheap software available and giving the
chasing to others, you will find more
time to focus on making your business
a success, with more bills being paid
earlier, and that is good for you and your
or contract, make sure it is mentioned
on this. If you ask customers to sign the
document, it is an enforceable contract
that you can rely upon should matters
take a turn for the worse.
As well as details of what your costs
cover, the policy should also inform
customers of your payment terms and
penalties for late payers, or – to entice
early payment – offer discounts to
customers who pay on time.
How long do you allow customers to
pay you? If your business is using too
many net days – that is the number of
days, you wait for payment – then you
could be storing up trouble for later.
Consider how much time you allow
customers to pay you; it may be worth
considering reducing this to encourage
earlier payment. It may come as no
surprise that the longer a customer
waits to pay, the less likely it is that they
Dealing with larger contractors
could be more challenging. In July,
trade body Build UK published pay
performance details of its 24 main
contractors, revealing that not one paid
supply chain invoices within 30 days.
Accepting a larger contract might
seem appealing as they can be
profitable, but make sure you work out
the impact on your cash flow before
26 www.rcimag.co.uk November 2018