Every fortnight, we hand over the blog to one of the London Shapers, to give you a flavour of what they do, how they think and what's really going on in our hearts and minds. Today's piece comes from Rich Serunjogi who, since leaving McKinsey, has been helping, freelancers, entrepreneurs and small business to thrive.
Late payments: the nightmare of small business owners everywhere. Whether a freelancer, an entrepreneur or a growing business owner, late payments have the ability to paralyse a business and keep you away from doing what you do best.
Christmas can be a particularly testing time with clients everywhere slowing down for the festive season, but getting that getting cash flow in is essential for having a strong start to the New Year.
Here are five tips for getting it done..!
1) Insert a late payment clause:
This first tactic works best if you start with the contract. Having a late invoice charge, with an interest fee for every additional week the invoice is late, can be surprisingly effective in incentivising clients to prioritise your payment. This will be great for any new contracts you receive over the next couple weeks.
2) Clarify payment time frame:
It’s crucial you find out when your client contact expects payments to be processed - what they deem to be realistic on their end. This is particularly important if there are multiple internal processes for payments to be made, which will often have backlogs that may not clear until the 2019.
3) Investigate who’s responsible:
Often your client contact knows as much about internal payments process as they do about the colour of the socks you’re wearing right now - in other words, absolutely nothing. With more people involved in the chain, the greater the risk of one person’s forgetfulness resulting in your invoice being paid late. So make sure the end-person is aware that your invoice is a priority.
4) Call up and speak:
Sometimes passive aggressive emails don’t cut it. More often than not, it’s not that your client contact doesn’t want to get your invoice paid, rather, there are other factors happening behind the scenes which they are dealing with. Time is of the essence, so if you don’t hear back from an email within a couple days, pick up the phone and talk it through. Ask for clarity on when you can expect the payment to go in.
5) Access cash flow financing:
If all of the above doesn’t work, and with the Christmas season impending, cash flow financing may be your smartest option to have certainty and ensure you emerge into 2019 ready to fly! For the same cost as a monthly phone bill, you can borrow up to £10k by paying a fixed fee each month, before returning the cash when your invoice finally comes through. With this option though, it's key to ensure you keep a close eye on your accounts and be aware of the costs involved with the debt.