Taking the decision to stop supplying a client can be one of the hardest decisions any company has to take. With every piece of business so hard won it can be difficult to take a firm line with your credit control and potentially prejudice further income.
But when a customer persistently refuses to pay in full and on time, sometimes you are left with little option but to act.
Along with traffic wardens, politicians, journalists and merchant bankers, debt collection is one of those professions that has a perennial problem with its public image.
But while the unfortunate association between debt collection and burly, menacing men using dubious means to take money from the poor and unfortunate may still persist, as with many things in life, there is significant gap between perception and reality.
New York publishing house Condé Nast has reportedly come up with a novel solution to the tricky issue of ensuring its contributors get paid on time.
As reported here, the magazine empire behind global titles such as Vogue, Vanity Fair, GQ and Tatler has decided to offer freelance writers an offer they cannot refuse - Condé Nast has very generously offered to pay invoices early, in return for a small reduction in the payment. Must be to cover all of the extra admin involved.
Having to deal with invoices that are not paid on time is stressful for any business owner. Late payments can seriously disrupt cash flow, take precious time to sort out, and can sour relationships with clients.
Most late payments are one offs and arise from perfectly understandable circumstances. With a little dialogue and a little patience, most can be resolved amicably. But what about that small minority of clients who persistently pay late?
Small and medium sized businesses need to be aware of a rising wave of frauds affecting companies big and small. The current most frequently used type of fraud is often called “Fake CEO Fraud” and we would urge all UK businesses to stay vigilant or potentially stand to lose significant sums.
For thousands of small to medium sized businesses, cash flow is probably the single most important aspect of financial management. And yet when it comes to planning and forecasting, it often receives scant attention. Indeed, many businesses unfortunately only realise how crucial cash flow is when problems occur.
Having to chase late payments is sadly an experience most people in business have to go through at one time or another. But knowing when irritating delays have crossed the line into a breakdown in the business relationship can be difficult to fathom.
Cash flow is important, but long-term survival depends on holding on to the clients that you invested in.
British businesses are facing a unique set of circumstances right now - the global economy is emerging from the deepest recession in living memory, domestic trade is uncertain with the EU Referendum looming, and there are issues of legislation from the National Living Wage to auto-enrolment pensions that are affecting company finances on a national scale too.
With all of this in mind, what are the implications for businesses of all sizes when it comes to getting paid for the work they do?
We recently blogged about Crowdmix, the London-based start-up that went into administration. It’s a sad fact that many businesses fail within their first year. This can’t always be prevented: starting a business is tough. But there are certainly things you can do to avoid disaster.
Profit is important to all businesses, but don’t underestimate the importance of cash flow either.
London based start-up Crowdmix Ltd was in the process of developing a social media music platform. But before it could even launch its product fully, it ran out of money despite having previously raised £14 million in funding.
As of Monday 11 July, 2016, it has left its creditors, many of them freelance contractors, tens if not hundreds of thousands of pounds out of pocket. If you’re owed money by Crowdmix the prognosis for recovery is not good, so let’s look at what happens next.
When you sign up a new customer or client, it’s tempting to skip the formalities. New customers are always keen and it seems like nothing can go wrong. The last thing you want to do is sour the relationship, or risk losing a client to a competitor. If you ask for a deposit, are you at risk of scaring them away?
In truth, most businesses are used to paying deposits especially if they are dealing with freelancers or micro businesses, and there are plenty of good reasons that you should ask for one.
Unless you have the luxury of an in-house credit controller - which is something even some larger firms can't afford - you might be tempted to take a head-in-the-sand approach to chasing overdue invoices, and simply try to pretend they never happen.
Sadly they do happen, even from trusted long-term customers, and that can lead in turn to some soul-searching: Why didn't they pay? Did I do something wrong? Is there no trust in business any more?
An unpaid invoice is a nightmare we would all prefer to avoid, but you're not necessarily just at the whim of your customers when it comes to whether or not you get paid on time.
It's also important to make sure you are invoicing properly - from the moment you take on a new customer, to how you deal with late payments - so you don't lose a single penny through your own fault and poor admin procedures.
Web designer Frank Jonen has taken extreme action against his late-paying client, San Francisco-based gym chain Fitness SF.
Mr Jonen's web design firm has been working on the new Fitness SF website and brand identity for over six months; but he ultimately took the decision to replace their homepage with a simple text statement.
We regularly speak to Freelancers and Contractors who are uncertain on how to handle the credit control process after an invoice has been issued. Credit Control (occasionally called "Dunning") is no black art and it is simply a mix of common sense and a considered approach to ensuring any monies are paid in full and on time.
Below you will find an easy to understand infographic outlining a suggested process for any contractor issuing invoices on 30 day terms. If your business terms are longer or shorter then just adjust the steps below to suit your client.
Have you heard the one about the Croydon conman who paid for his shopping in Harrods with a £245,000 dud cheque?
It's no joke - 49-year-old Philip Buffett of Fairfield Road faces a jail term for fraud after paying with a cheque from a closed account for goods including a £183,000 Hublot watch.
Daring to speak out about late payment on Twitter could cost one woman £120,000 in fines and legal costs - all because of an unpaid £146 invoice.
The BBC reports that 55-year-old Lesley Kemp of Milton Keynes carried out £146 of transcription work for a company based in Qatar.
But when Resolution Productions paid her late - and expected her to cover the cost of their own £25 bank charges - Ms Kemp vented her frustrations on Twitter.