Recent reports from Paym show that currently, one in three sole traders struggle with late payments, with approximately 50% reporting not getting paid on time or, even worse, not at all.
The UK self-employed lose out on £8.1 billion per year, accounting for approximately £2,472 each.
This is no small sum.
What’s more, we understand from working with clients that the number of payments and invoices written off is also on the rise.
For many, giving up on chasing outstanding invoices is often the only option, negatively affecting business and brutally impacting cash flow.
Not only is this approach not sustainable for businesses in today’s economic climate, but, put simply, it’s just bad business.
We know and understand that not everyone has the time or resources to chase late payments continually. Not only is this an area of business that can make some people slightly uncomfortable, but it can also lead to neglecting other areas of your sales ledger.
Outsourcing your invoices to professional commercial collectors offers you the best chance of receiving payment, allowing you the space and providing you with the cash flow to carry on growing your business.
Direct Route’s commercial debt recovery page showcases the range of debt recovery solutions we offer. Designed to work with you and your business practices.
Sole trader payment
You must maintain a healthy cash flow for your business to support a healthy work-life.
This makes getting paid on time, every time, vital. You need to know how to react and be prepared to take the next steps when an invoice becomes overdue.
Steps to take to avoid late payment of commercial debt
1. Don’t charge straight in – when an invoice becomes late, or you have been made aware that the customer is refusing to pay, it can be a very stressful time, and often emotions will be run high. We’d advise waiting 1 or 2 days before sending a polite but firm reminder. Trying to get to the root cause of the late payment is key.
2. Set payment terms at the beginning – it is not uncommon to outline your invoice period and payment terms before any work gets underway. Currently, a 30-day payment term is the most typical time period (however, we are aware this varies from industry to industry). These initial payment terms help ensure payment and provide an understanding to all involved that the customer will incur additional interest and late payment charges if payment is late.
3. Both parties should sign a contract – having something in writing protects you and your customer. A legally binding document, your contract must detail all work to be carried out, the price of the work, and when payment is expected.
4. Communicate – make sure to keep the lines of communication open, especially when invoices become overdue. For example, calling the client to chase payment is perfectly acceptable, as is re-issuing statements and letters.
5. Work with a professional debt collector – specialising in providing you with successful debt collection services to help with sole trader payment; Direct Route helps recover thousands of pounds for commercial businesses every year.
To find more about the pros and cons of collecting in-house vs. outsourcing debt collection activities, make sure to read our blog HERE.
Benefits of outsourcing
We get results – working with a professional debt recovery agency means you can draw on their experience and expertise in collections. At Direct Route, we know what is needed to get results, and we know how to handle even the most challenging situations.
You get back the element of `time` – we understand how precious your time is as a sole trader; that’s why you can regain time and resources by outsourcing your overdue payments. Allowing you to run a successful business with peace of mind that your outstanding cash flow is in safe hands.
Complete visibility – you can have full transparency on all collection activity; you are still in complete control of your credit processes.
Maintain customer relationships – we understand that maintaining customer relationships is key for small businesses, which is why we use our experience and skills to get results and preserve our relationships.
Flexible pricing structure – professional debt collection services are priced based on whether the collector is successful with their recovery attempt. To learn more about our pricing structure, speak to a team member today on 0330 229 1991 or email firstname.lastname@example.org for a quote.
Working as a freelancer or sole trader can be challenging at the best of times, but, when struck with late payers, with invoices becoming overdue and outstanding debts taking up more and more of your time, this can make running a small business much harder, stressful, and an uncomfortable position to be in.
At Direct Route, our team is on hand and ready to help you today.
We use tried and tested, successful practices and procedures to ensure effective and efficient recovery.
Providing you with expertise and experience, we’re proud to deliver real results.