How to reduce the impact of late payments

Late payments are more than just a frustration, they are a serious risk to your cash flow.

For fast-growth businesses, where margins for error are often slim and costs are rising, unpaid invoices can create real problems: from delayed investment and hiring decisions to struggling to cover your own supplier or payroll commitments.

In this edit of Scale Monthly, we consider the hidden costs of late payments and, more importantly, how to get ahead of them with better processes and smarter tools.

Why you need to address late payments

Whether it’s a client who is slow to pay or a backlog of overdue bills, late payments impact more than just your bank balance. Here’s where they can impact most:

• Time lost chasing invoices – Every hour spent following up with clients is time not spent on activities that drive growth.
• Cash flow stress – Irregular or unpredictable income makes it harder to plan or invest with confidence.
• Risk to relationships – Chasing late payers can be awkward and damage the rapport you’ve built with clients over time.

4 ways to reduce the impact of late payments

Getting paid on time is about more than sending an invoice. Removing friction from your payment process goes a long way to ensuring prompt payment.

Here are four key questions to ask yourself as you review your cash collection process:

1. Are you making the most of your existing software?

If we take Xero as an example, there are a number of built-in features that you can use to kick start your Credit Control:

• Use the email function in Xero to track when your invoices are viewed by your customers.
• Create pre-set follow-ups to your Sales Invoices, even if it’s just a polite nudge on the invoice due date.
• Send bulk statements directly from Xero.
• Create credit limits and create automated warnings for when those credit limits are passed for a client.

2. Do you have clear payment terms?

• You should always agree payment terms in writing before work begins – these terms can be set within your software.
• Be sure to include due dates and penalties for late payment in your engagement letters or contracts.
• Make your terms visible on every invoice.

3. Are you making the most of automation when it comes to sending chasers?

• Set up automatic reminders that are friendly but firm.
• Use tools like Chaser or GoCardless that integrate with your cloud accounting software.
• Track who is consistently late and follow up personally when needed.

4. How simple is your check out process?

• Make it easier for your customers to pay by including payment links directly on your invoices. Solutions like iwocaPay, Stripe or GoCardless make this easy.
• Offer multiple payment options, including direct debit, card, bank transfer as well as digital payment methods.
• Consider incentives for early payment (or penalties for late).

Making some of the above changes will not only streamline your payment processes, but also reduce the administrative burden associated with managing late payments.

There are countless apps and clever automations that can be set-up to help mitigate risk, save time and remove the admin burden of chasing overdue invoices.

How we can help

At Harold Sharp, we specialise in helping ambitious businesses navigate growth challenges. From selecting the right tools to providing expert guidance, we’ll help you build the financial clarity and resilience you need to run your business smarter.

If your business could benefit from speedier payments, contact James Turner on the below or complete our Contact Form.

James Turner
Accountant | Fast growth
0161 905 1616
jt@haroldsharp.co.uk