Brought to you by
Share this content

Advising clients with late paying customers

27th Oct 2021
Brought to you by
Share this content

Late payments are a real problem in the UK, especially for smaller businesses. When 62% of small businesses have experienced late payment or frozen payments since the pandemic, according to FSB, it’s likely that your clients are affected too. 

Late payments were an issue before the pandemic began, and have historically been a cause of businesses failing to survive. As an accountant you can help guide your clients through what to do if they are affected.

Charge interest

Many new businesses don’t know they’re able to charge interest on late payments. This needs to be added in the payment terms before an invoice is sent. Let your clients know this is possible, and advise them on a reasonable amount to charge.

While interest won’t help while the payment is pending, it can be effective at discouraging late payment, and offer compensation for the wait if the debt is paid.

Offer support

If a business has a repeat late paying customer, it might be better if they cease business with them. This can be a difficult decision for a small business, especially if they’re still building their reputation and customer base.

Financial advice and forecasting on what would happen if that customer weren’t in the picture, and how they could make up for the deficit can help give them confidence to move forward with a decision. 

Advise on partial payment

Sometimes a company’s client is genuinely unable to pay the full amount, but could offer a partial payment. At a basic level, you can make sure this payment is recorded correctly in their accounting, or you can help advise on a payment plan that will work for your client.

Help with how to proceed

If the business still can’t pay, your client has a few choices. They could hire an expert, take it to court, complain to the Small Business Commissioner, or write off the bad debt. Ultimately this is your client’s decision, but you could advise on the impact of the different options on their business finances.

Invoice finance

There are different types of invoice finance available that can take the pressure off receiving late payments. However, this is taking on debt for the business, especially if the finance type chosen relies on the client chasing up their debt themselves. 

With your knowledge of your client’s cash flow, you can offer your expertise in making the decision whether invoice financing is the right choice for their business’ long term financial health.

About Bokio accounting software

Bokio accounting software offers bookkeeping, invoicing and expenses management. It’s a great solution for collaborating with smaller clients, like small businesses, sole traders and freelancers. Bokio helps you save time by using automation, so you can focus on offering high value advisory services.