There are many examples of companies of all types and sizes that have been forced to cease trading simply due to a lack of funds.
Cash flow is one of the most important elements of any business and decisions have to be frequently made on investments designed to continue or secure the company's trading effectiveness, with further implications for future growth in many cases. These choices can only be made with any degree of confidence if there are effective systems and processes in place to ensure a regular flow of income into the business.
While the larger firms will have sufficient resources to employ staff for the specific purpose of managing this process, smaller companies frequently see part-time workers fulfil this role, with many also expected to carry out other duties as well.
Are late payments stifling your business?
Regardless of the size and type of business, there will always be issues over payment due to a number of reasons, presenting the problem of how to deal with this as effectively as possible. It is an unfortunate fact of life that customers can be difficult, sometimes for no apparent reason, so it is therefore best to have clear practices to follow so that everyone knows where they stand, avoiding initial misunderstandings that can grow into something more serious if not quickly resolved.
All the above will be familiar to providers of heating and plumbing services, the majority of which fall into the 'S' bracket within the SME business community. These will typically operate within a relatively limited area and therefore have the opportunity to flourish as a local supplier through satisfied customers recommending them to friends, family and neighbours.
While local contractors will always have the opportunity of gaining business through providing a reliable, effective and - in many instances - friendly service, the problem of late pay will still raise its ugly head on occasions, but there are a growing number of options to consider to reduce these.
Clear communication of the terms and conditions (Ts&Cs) is an essential first step in any business transaction, especially when dealing with a new client. Where possible, credit checks should also be carried out before any agreement is entered into.
Potential clients returning a low credit rating can always be invited to pay in advance of work being completed. It is also reasonable for companies to request a deposit in advance of starting work, regardless of the credit rating of the customer, which will help to cover the cost of purchasing equipment prior to starting work and also provide an indication of the client's attitude toward payment in general.
One of the issues commonly facing the heating and plumbing sector, however, is that many of their calls involve the failure of heating and hot water systems, requiring prompt action by the engineer. It is often impossible to enter into credit searches and lengthy discussion prior to beginning the work, but the following of simple procedures can still be used to avoid or reduce payment issues.
One method proving increasingly popular with mobile workers is:
The use of technology to allow the customer to make payment while the engineer is on site by using mobile chip and pin card readers, helping to maintain the all-important cash flow of the business, using suppliers such as SumUp.
There is also a growing number of companies using systems that incorporate services such as work scheduling, tracking of individuals and resources and parts ordering for mobile workers, which additionally include the option of receiving payment by the company representative on site.
Late payment has the potential to seriously impact on any business, but can be alleviated by recognising the danger and putting reasonable practices in place.
Top 10 tips to avoid late payment
- Establish clear and simple Ts & Cs, avoiding excess 'small print'
- Ensure these are explained to the customer before starting work
- Make sure these are fair and reasonable for both parties
- Address any issues or misunderstandings as soon as they occur
- Request a deposit in advance of starting work where necessary
- Conduct credit searches for new clients
- Enable engineers to collect payment on site
- Charge interest on late payments
- Train staff in payment procedures and all aspects of customer service
If credit terms are agreed, provide clear deadlines when payments should be made.
If you want to know more about how to avoid late payment take a look about Commusoft job management software and SumUp payement solution integration.
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