How to Collect Money Owed to a Small Business

Times are incredibly tough for small businesses across the length and breadth of the country - and the world - during COVID. We have all had to adapt and almost no one will come out of the situation unscathed. It's now more important than ever to ensure that you are collecting money that is owed to your business. However, many business owners are unsure about how to collect money owed to a small business like themselves.

Whether you're trying to collect an invoice which has been ignored or you are owed reimbursement from a supplier, it's essential to collect the money you are owed through this difficult time. Throughout this guide, we will discuss how to collect money owed to a small business to help you settle the ship moving forward.

A Guide on How to Collect Money Owed to a Small Business

Continuing to allow payments and debts to be paid late can disastrously impact your business and cashflow. As it stands, around £50 billion worth of invoices are currently still unpaid across SMEs in the UK. Although late payments may not always be avoidable, there are methods which can help to reduce and minimise their impact.

When sending out an invoice, always make sure that the payment date is listed clearly in all communications to your clients and partners. If the payment date comes and goes without payment, ensure that you email your correspondence immediately and give notice that you demand the funds within a week. If this period comes and goes as well, call your contact to see if there are any issues with the invoice, find out why the payment is late and demand the funds again.

You must have as much information on your client or partner as possible. This will help you when fact-finding or if you are required to pass on their details to a debt collection service. Before you even send the invoice out or agree to a contract, aim to credit check your partner to see their credit history. If there are any concerning indicators, you may want to ask for a shorter payment period for that client or require the payment to be cleared before any work is carried out.

If and when your final notice period has passed and you have already contacted your client more than once, you can pass over their details to a professional debt collector. These services will send a letter before action which notifies the debtor of the debt. From there, the debt collector will go to the small claims court to litigate against the debtor, recover the funds and get compensation for the late payment.

Using an external body to collect debts on your behalf helps to distance yourself from the debt collection process. This can provide you with the groundwork to retain a good working relationship with your debtors despite the late payment.

Protecting Yourself at The Invoicing Stage

Prevention is always better than a cure. This is why it's vital to include protections against late payments when sending out invoices. One popular method of doing this is by including a late payment fee to encourage your partners and clients to ensure they pay on time. Making this clear in all communications will help to ensure that you get paid on time. Sticking to this late fee if funds are transferred past the deadline is important as well.

Accountancy Advice

Based in Aldershot, Hampshire, Keith Graham Chartered Accountants are accountancy experts with more than 20 years of experience in the industry. We've been providing expert accountancy and auditing services in the area since 1993, working with countless clients. Whether you require help starting a new small business, accounting, bookkeeping or simple tax advice, we can help. Get in touch today and we'd be happy to help.

To find out more about our services, please feel free to contact us via our online contact form. Alternatively, call us on 01252 312561 or email us at info@keith-graham.co.uk.