Quick tips on getting paid in the downturn from the Small Business Commissioner Philip King and Nimbla’s Flemming Bengtsen.
What can I do if a customer puts a freezes payments completely?
- Report the customer in question to the Small Business Commissioner at [email protected]. Whilst the office cannot force your customer to pay, they can put pressure on them to do so.
- Report them to Nimbla to make sure that their credit score reflects their payment practices, and put pressure on them that way.
- Take legal action, although this process can be slow.
- Visit Enterprise Nation’s Coronavirus Hub for more help.
What can I do if I want to keep my relationship with my customer intact, and get paid?
- Even legal action will not release the funds instantly. Conversations are key. Build on the relationship you have with your customer to get to the top of their priority list. Share the impact that not getting paid is having on you and your business.
- Collaborating with rather than confronting your customer is key in this circumstance.
What are Payment Plans, when should I use one and how can they help?
- If your customer doesn’t have the funds to pay you in full, you can make sure you get some payment by setting up a Payment Plan with them.
- If you have a Payment Plan in place, your creditor cannot legally claim that there was a dispute.
- In the present climate, payment little and often is preferable to not getting anything, or pushing a customer into insolvency.
- Distinguish between companies that have the money to pay you, and those that don’t.
- Ensure the timeline you put in place is not overly optimistic to avoid frustration and maintain the relationship.
- If you would like Nimbla’s help to set up a Payment Plan, contact us now at [email protected].
Should I charge interest on late payments?
- Under Late Payment Commercial Debt Act, you can charge interest on an overdue invoice, and pass on the collection costs too.
- Under the 2013 regulations, you do not have to give advance warning of your intention to exercise this right.
- Charging interest can help to focus the mind of your debtor, and incentivises them to pay you rather than someone else.
What happens if a customer goes into liquidation whilst owing my company money?
- You can put your claim in with the administrator carrying out the insolvency proceedings, but as an unsecured creditor, you are unlikely to redeem more than 10p in the pound.
- If you sell products (not services), can insert a ‘retention of title’ clause in your contract. See Nimbla’s blog on Retention of Title clauses.
- Make sure that the products are clearly recognisable as yours.
- You can invoke ‘retention of title’ if your customer is fails to pay, not just if they enter insolvency proceedings.
What is factoring, is it useful and how does it work?
- You can sell your invoices through factoring, although the factoring company will take a cut of the invoice.
- The charge you pay will be determined by your credit rating and that of your debtor.
- Unlike CBILS and BBLS, factoring and invoice finance do not require you to give a personal guarantee and can provide cash quickly.
How can the Small Business Commissioner help me get paid?
The Small Business Commission was established in 2017. It’s role is to:
- Provide advice and guidance to small businesses that are struggling to get paid by their larger customers.
- Investigate instances of nonpayment by small businesses’ large customers, and mediate between the two.
- Change the payment culture of the UK and engage the business community in making payment prompt.
How can invoice insurance from Nimbla help me get paid?
Nimbla makes trade credit insurance accessible for SMEs. With single invoice insurance, you can protect the invoices you want against customer defaults.
- If your customer becomes insolvent and you are an unsecured creditor, it’s unlikely that you will get your money back.
- If your customer becomes insolvent and you have insurance, Nimbla will pay you 90% of the invoice value (subject to reasonable Terms and Conditions).
- If Nimbla can’t insure your invoice, you probably shouldn’t offer the company credit, because the risk of them not paying you is very high.
About Enterprise Nation
Since launching in 2005, Enterprise Nation has helped thousands of people start and grow their businesses. Led by founder Emma Jones MBE, Enterprise Nation is an active UK small business community and a leading campaigning voice for small business. Find resources, community and connections on their website.