Running a business is hard. There are a million and one things to think about every single day and your focus should always be on how to improve and thrive. Unfortunately, late payments can throw operations into disarray and through no fault of your own. It’s one of the most frustrating elements of business and something most firms deal with.

A shocking recent survey has shown that half of SME owners in the construction sector have suffered very real repercussions because of late payments.

So, with all this in mind, let’s look at how you can bring your number of late repayments down.

Research & Vetting

Bringing in new business is always a great feeling, but don’t jump in with both feet. Take the time to learn about your new prospective client, and start researching as soon as they reach out.

Look at things like credit reference agencies, but also go deeper and find whatever information you can about the new prospective client. When you’re armed with the facts, you can make an informed decision on whether this is a firm you want to do business with. It’s a simple point, but one that can offset a great deal of stress later.

Be Clear on Payment Terms

It’s a funny fact of business that some people feel like they are being too heavy-handed by being upfront about expected payment terms. But it’s important to push this aside and be crystal clear and transparent about when you expect to be paid.

Make this part of your process when talking with potential new clients and everyone will know where they stand. State this information clearly on invoices and other agreements, and there can be no excuse for late payments.

Don’t be Scared to be Firm

When a client is late with a payment, the temptation is to be understanding and accommodating, but this isn’t a credit-lending situation and that unpaid money is yours by rights. You need to be ready to state, firmly and clearly, that you expect payment by a specific date or you will have to re-evaluate this business relationship. It’s not nice but businesses don’t run on promises, they run on money.

Incentivise Prompt Payment

Many businesses mitigate late payments by making prompt payment more attractive. Usually, this in the form of a discount for payment on receipt or within an agreed number of days. Obviously, you don’t want to cut your margins down too much, but this is a great way to show customers your value prompt payment and avoid lengthy delays.

If you’re seeking finance for your business, get in touch with GIC Capital today. Offering a range of finance solutions, GIC Capital works with you to find the perfect solution for your needs. 

For SMEs taking their first steps as overseas exporters, one of the biggest concerns can be ensuring that they are paid promptly for their goods from their customers.

Distance, language barriers and variations in the way that business transactions are carried out can all contribute to difficulties for SMEs.

While these challenges can seem unavoidable, there are steps that you can take to ensure that the process runs as smoothly as possible.

Common payment methods for overseas customers

When it comes to receiving payment from an overseas customer, there is not a one size fits all and there a number of ways that your customers may choose to pay.

• Cash in advance 

This is the preferred payment method for most exporters and is particularly beneficial when you are dealing with new customers. Choosing this payment arrangement means that goods will need to be paid for before they are shipped to the customer, so is a great way to guarantee payment.

• Using electronic transfer 

There are a number of ways to do this, including SEPA, which allows credit transfers to be made between banks and firms within 30 European countries.

• By a banker’s draft  

A bankers draft is a cheque that is prepaid and guaranteed by the overseas customer's bank. This is preferable to payment by a normal cheque, but there is still a delay before currency items are cleared, making the value of the payment subject to fluctuations in the exchange rate.

• By cheque 

If an overseas customer prefers to pay by cheque, you should always wait until it has cleared before you ship the goods.

Hints and tips

• Deal with overseas customers in the same way you would a UK customer. Do not commit to a deal or payment method until you are sure that the foreign company is a reliable payer.
•  Be sure that you have implemented a robust non-payment plan. Late payments will adversely affect your cash flow and a sudden drop in the exchange rate could mean that you will lose money on the original deal.
•  You can take out insurance against non-payments which will ensure that some of the money is recovered, there is no guarantee that you will be able to gain back the entire cost of the transaction, so it’s important that you manage your expectations in this sense.