If you freelance or run a business in the creative industry, there’s a good chance you’ve felt the effects of a late payment before. By making just a few small changes, you can practice better credit control and help protect yourself from bad debt.
Findings from online lender MarketInvoice have shown that 48% of businesses in the creative industry were paid late last year. Since a lot of companies working in the creative industry tend to be small agencies, consultancies or even freelancers, this can have a huge knock-on effect for their cash flow.
In 2018, the average invoice raised by the creative industry was paid 13 days beyond agreed terms, while 14% of invoices were settled over 14 days late.
Small companies are often also more likely to agree to longer payment terms in order to land large projects, meaning they could wait up to 90 days for payment of invoices.
So what can you do if you’ve found yourself in this position before or feel that you may be at risk of late payments? We’ve pulled together some simple tasks that you can do in one hour or less to help you get paid sooner and reduce your risk.
Review your invoice
Take the time to consider whether you are offering the most appropriate payment method and how clearly it comes across on your invoice.
You should also make sure that your credit terms, details of work etc are easy to understand and clear to reduce the chances of your customer having any disputes.
Contact customers who are overdue
Prioritise contacting customers with an outstanding invoice and be sure to adjust your approach to the conversation depending on how long the invoice is outstanding by.
If the invoice is overdue by just a few days, you can ask for an explanation for the delay, reaffirm how important it is that the invoice gets paid and explain what your next steps will be if payment is not received. The longer it goes without payment, the firmer you will need to be in your approach.
Take action on aged balances
If you still haven’t received payment after chasing up with a contact, you may need to consider how best to handle it. If chasing a single customer is taking up a large amount of time when you could be reaching out to other customers or getting on with your workload, you may want to consider turning to the services of a professional debt collection agency.
They can take on the burden of recovering the payment, and free you up to focus on other important customers or projects.
Contact customers approaching their due date
If you’re keeping track of your invoices and know when a customer’s due date is approaching, it can be much easier to call them beforehand and remind them that the invoice is due than trying to call them once its already late.
This can help encourage customers to pay on time as it gives them time to get any problems sorted before the due date, stops them from claiming that they simply forgot and shows them that you are efficient and persistent with your credit control.
Credit check long-term customers
If you have a customer who you have been working with for months or years, it is unlikely you will have credit checked them since you first started working with them.
The financial position of a business can change incredibly quickly and it can be worth running regular credit checks for long term customers, particularly those with a high order value. It is possible to get a subscription that allows you to schedule credit checks with some providers, as well as running them on an hoc basis – and be sure to always credit check new customers to ensure they’re creditworthy before you agree to work on credit terms.
Book a training course
If credit control is something you’ve struggled with in the past, or that you’re fairly new to, it may be worth booking yourself onto a training course.
If you are freelancing or running a company for the first time it is likely that you haven’t had to worry about credit control before and it can often feel awkward approaching customers about payment. Booking a training course can not only help you learn how to save time and reduce your risks but can also boost your confidence when it comes to these conversations.
Find online resources
If a training course isn’t an option, take the time to look for online resources that can help you practice better credit control.
Although managing your finances may not be your favourite part of the job, particularly if you’re used to working in more creative environments, it is essential to the success of your business, so it’s worth taking the time to do it right.
If you run a small business or freelance, you may benefit from talking to other people in your position. At SO Fourteen we encourage our members to network and share advice when using our space, so why not book a tour and see if it could be right for you!