How to deal with overdue invoice payments

Late payment continues to prove a major headache for many small businesses. According to the Federation of Small Businesses, late payment impacts 52% of small UK firms, with an estimated 56 million hours of productivity lost each year and 50,000 small firms going bust as a consequence.

In September 2024, the government unveiled a new Fair Payment Code as part of a package to tackle late payment in the UK. The Code is a tiered system of awards that acknowledges best practice in payment.

Reasons for late payment

Late payment can cause serious cash flow issues and otherwise good customers can be bad when it comes to paying you on time. Large companies are often the worst culprits, with their accounts people habitually ignoring suppliers’ payment terms because they believe they can get away with it.

Even if cash flow impact is manageable, having to chase repeatedly for payment can be irritating and time-consuming. In limited instances, your invoice may have genuinely been mislaid, or not sent on by your contact to accounts for payment. If this happens, send a replacement and request payment to existing terms.

Sometimes late payment can be your fault, with incorrect details on your invoices leading to unnecessary delays. Your customer should have raised any problems long before they received your invoice, so this isn’t a valid reason for not paying you when due. Sort out any genuine issues quickly and make sure you send your invoices as soon as possible.

Sometimes customers have understandable reasons for late payment. They could be waiting for payment from their customers. If you’re not expected to wait a long time, showing some flexibility is advised. Obviously, you’ll want to protect your customer relationships, so your approach must be tactful and professional. However, if they end up not paying you, they’re not a customer, while some customers can, quite literally, be more trouble than they’re worth.

“Some customers can, quite literally, be more trouble than they’re worth”

Chasing unpaid invoices

If you still haven’t been paid the day after the due date, contact the customer to politely request immediate payment. Never let days (let alone weeks) go by without chasing unpaid invoices, even if it’s something you hate doing or worry that it will upset a customer. Be friendly, but firm. You’re asking for money that is rightfully yours.

Some customers try to delay payment as much as possible, which can damage your cashflow significantly, especially if you have more than one late payer. There is also a risk that the more time you give, the more customers will expect, so stick to your agreed credit terms (30 days is standard). Any delays should bean exception.

If a customer asks for more time to pay, you’ve every reason to ask why and when they expect to pay you. If it’s a few days, fine, but several weeks or more is a much bigger ask. Agree a deadline, expect payment then, and (to protect yourself) suspend any further sales or supplies until the bill is paid in full. Good customers will understand. Constant broken promises and not replying to your phone calls and emails are bad signs, which should prompt you to up the ante.

“You can claim interest of 8% over the Bank of England base rate for B2B transactions, as well as debt-recovery costs if a business is late paying you.” 

Charging interest and debt recovery

Bylaw, you can claim interest of 8% over the Bank of England base rate for B2B transactions, as well as debt-recovery costs if a business is late paying you. If a payment date has not been agreed, by law, late payment is 30 days after supply of the invoice or the goods/services (if later). Telling a customer that you plan to add interest to an unpaid invoice can be enough to secure payment.

When dealing with larger amounts, offering to accept instalments can help your customer, while ensuring that you get all or most of your money. Emails and letters are easy to ignore, so always speak to customers when chasing unpaid invoices, following up with an email or letter to confirm if a delay has been agreed.

Invoice factoring can ease your short-term cash flow pressures. Effectively, this is where a bank or other invoice factoring service provider buys your unpaid invoices for less than the stated value and either they pursue payment or you do and pay them when your payment is received.

If all your efforts fail, consider contacting a reputable debt-recovery agency. Some don’t charge if they don’t recover debts. Get references and find out exactly what fees or commission they charge before coming to a decision. If matters get really bad, you can apply to the court to ‘wind up’ a company if it cannot pay its debts.

• This blog was produced for Coconut Accounting Software.

Are business plans a total waste of time?

A survey carried out by business software provider Exact suggests that more than a third of the UK’s 4.9m SMEs don’t have a business plan and “they could be missing out on an extra 20% of profit as a result”.

Of the 34% of respondents who didn’t have a business plan, 68% said they didn’t see the need for one, while 23% were “too busy” to prepare one, 8% “didn’t have anyone to help them” and 5% “weren’t comfortable with numbers”.

Should we be surprised by these findings and are business plans as essential as some start-up experts would have you believe?

Some experts would tell you that start-up business plans aren’t worth the paper they’re written on

Waste of time

Some experts believe start-up business plans aren’t worth the paper they’re written on. Author Paul B Brown, wrote a piece for Forbes.com called Why Business Plans Are A Waste Of Time., after he came up with the idea for a new book that sought to offer insight from the original business plans of highly successful US entrepreneurs.

But there was a problem. As Brown explained: “Most of the business plans had nothing to do with what the businesses eventually became. People who said they were going to specialise in developing new computer hardware ended up in software, for example. In a surprisingly high number of cases, what was in the business plan ended up having very little to do with what the company ultimately became.”

After writing about entrepreneurs for more than 30 years, Brown believes that creating a “painfully detailed business plan really doesn’t make much sense. The first time you encounter something you didn’t expect, the plan goes out the window. Things never go exactly the way you anticipate.”

Some of the heroes of today’s would-be entrepreneurs, such as Steve Jobs, Bill Gates and Michael Dell, did not have business plans when they embarked on ventures that changed the world

Business plan myth

A few years ago, (“former banker, small-business investor and veteran entrepreneur”) Kate Lister wrote a piece for Entrepreneur.com called Myth of the Business Plan. She highlighted research from Babson College (“regarded as having one of the top entrepreneurship programs in the country”), which found “no statistical correlation between a startup’s ultimate revenue or net income and the supposedly requisite written business plan”.

The study found that: “”Some of the heroes of today’s would-be entrepreneurs, such as Steve Jobs, Bill Gates and Michael Dell, did not have business plans when they embarked on ventures that changed the world”.

Great business plans may earn you an A in business school, but in real life you only get As for achievement

Lister said she was “all for having a business plan in the verb sense. I’m just not a big believer in the noun form”. She continued: “Writing a formal business plan invites the paralysis of analysis. It distracts the entrepreneur from slaying dragons and thinking big thoughts. And it’s largely a waste of time. The result usually is a long-winded missive that’s out of date almost the moment the ink dries. Great business plans may earn you an A in business school, but in real life you only get As for achievement. So stop dotting your i’s and crossing your t’s and go out there and slay something.”

Success Plan

Andy Fox is the founder of “award-winning independent car service and repair specialist” iAutoUK. He wrote an article for the Huffington Post called “Why You Don’t Need a 40-Page Business Plan to Launch a Successful Company” (sic).

“I’ve never had a business plan,” he admits. “Despite this, in three years my company has reached a turnover of over £1m, with £100,000 annual profits. For your business to thrive you instead need a ‘Success Plan’. This is an evolving strategy consisting of three elements. No 40-page business plan needed. In fact, you can write a Success Plan on one sheet of A4.

Look at companies such as Comet, Blockbusters and Jessops. I’m sure their business plans didn’t include going into administration!

“Firstly, you must understand your market place and how your business is distinct from competitors. Secondly, the Success Plan must have ‘Leader’s Objectives’ and you must communicate them to your staff. The final element is to make sure you make money! You must have a system that provides you with daily earnings information, and which can monitor cash in the bank and in the pipeline.

“Such a Success Plan is a short, relevant, real-world document. I believe a Success Plan is more appropriate than a traditional business plan.” Dryly he adds: “Look at companies such as Comet, Blockbusters and Jessops. I’m sure their business plans didn’t include going into administration! Had they had a Success Plan, perhaps their futures may have been different.”

• This blog was commissioned by Atom Content Marketing and appeared originally on the Start Up Donut website.

How to create a new marketing plan for your accountancy firm

The lockdown may have smashed a gaping hole right through your marketing plan for 2020. You may serve sectors that have been particularly hard hit. Some of your prospects or existing clients may have already gone to the wall.

Many of the assumptions, aims and actions set out in your previous marketing plan may no longer hold water. Your marketing plan may not have been working anyway. And, whether through lack of time or knowledge, some smaller accountants don’t have a marketing plan, which may be limiting their growth.

Although many are understandably feeling slightly dazed and confused at the moment, doing nothing isn’t an option. All businesses must act if they are to get back on track, and creating a new marketing plan could really help your recovery.

“Planning is bringing the future into the present, so we can do something about it now”

Why create a marketing plan?

As once explained by celebrated American time-management author, Alan Lakein: “Planning is bringing the future into the present, so we can do something about it now”. Lakein is also credited with the often-quoted adage:  “Failing to plan is planning to fail”.

This is a slight over-simplification, because businesses without marketing plans aren’t necessarily doomed to failure. Moreover, marketing plans don’t guarantee success, because things don’t always pan out as expected. But planning can increase your chances of success, while enabling you to make the most out of available opportunities.

You can develop a marketing plan for your entire business or just a specific product, service, market or customer type. Your marketing plan need not be long or intricate, in fact, the shorter and simpler the better (the KISS principle certainly applies). Most marketing plans are for periods of one to three years.

Marketing plan basics

In essence, marketing is how you get prospects and customers interested in buying your products or services (after that, you’re into selling). The marketing process involves research, creating a service or product (sometimes), promoting, selling and distributing your wares.

According to Susan Ward: “When you’re putting together a marketing plan, concentrate on four key components – products/services, promotion, distribution and pricing.” Success rests on offering the right things for the right price in the right way, while ensuring that enough people know who you are and what you sell. Ward says creating and implementing a marketing plan can help you to keep your marketing efforts better focused, so that you ultimately make more sales.

If your market knowledge is out of date or lacking, your marketing plan will be flawed. If necessary, undertake up-to-date market research. Your plan must also summarise your offer (including your USP) and your market (ie its size, value, trends, etc), your target customers, your competitors and your market position. All of the above should also be up to date.

“The most crucial marketing plan aims are linked to sales, expressed in numbers or percentages, linked to those detailed in your business plan ”

Setting marketing plan aims

Take enough time to consider your marketing plan aims, which should be SMART (ie specific, measurable, achievable, realistic and time-bound). If they’re specific, you know exactly what you’re trying to achieve. If they’re measurable, you can assess your performance.

Ambition is a great thing, but there’s no point in setting unrealistic marketing plan aims, because you’ll only fail. You should set milestones and a deadline for your marketing plan, because then you’ll be able to assess your progress.  

Your marketing plan goals could include increasing awareness of your brand, launching new services and targeting new customers and entering new markets. However, the most crucial marketing plan aims are linked to sales, expressed in numbers or percentages, linked to those detailed in your business plan.

“If you spend time creating a sound marketing plan, it could make a big difference to your ability to survive and thrive in these challenging times”

Marketing plan strategy

Now you must decide your marketing tactics or marketing strategy, in other words – how you’ll achieve your marketing plan goals. Key options include search engine, email and content marketing, PR, social media and advertising, while word-of-mouth recommendations remain important to many small accountancy firms. Most businesses use a mix of tactics, and if don’t know which ones work best – test, measure and learn.

Once you’ve decided your marketing tactics, calculating their cost allows you to set and allocate your marketing budget. Closely monitoring which marketing tactics are delivering the required results will enable you to assess your return on investment. Over time, you’ll be able to allocate your marketing spend where it’s most likely to deliver your marketing and business plan objectives.

Finally, creating a marketing plan that you never use is pointless. If you spend time creating a sound marketing plan, it could make a big difference to your ability to survive and thrive in these challenging times. To quote another popular business adage, action without planning can prove fatal, but planning without action is futile.

• With 15 years’ experience as a leading writer of small-business content, Mark Williams is the founder of Dead Good Content, which specialises in writing bespoke and ready made SME blog and news content for accountancy firms and others that want to market their services to small businesses.