As businesses struggle with late payments owed by clients and suppliers, there are options and measures available to business owners to assist in collecting money that is owed to them, and sooner.

Figures from credit reporting bureau CreditorWatch have revealed business payment defaults are at record levels, up almost 70% in the past year in the latest Business Risk Index. The data also highlighted a strong correlation between B2B payment defaults and business failures in the following 12 months.

Cash flow concerns have increased significantly in the past 12 months as businesses deal with increased costs, reduced income and changed payment terms. The first step in chasing up non-payment is to determine if the business can’t pay you, or simply won’t.

If they can’t pay you because they don’t have the money then you can potentially start to work on a payment plan or work out terms going forward.

But if they simply don’t want to pay you, for whatever reason, then you can expedite your process accordingly, whether that’s referring to a third party or potentially reporting the business to a credit reporting agency.

Don’t waste time simply hoping someone will pay you, find out why.

There are steps businesses can and should take to collect money that is owed;

  • Determine the relationship: Do you want to continue to work with the non-payer, or are you willing to cut your losses? If you want to maintain the relationship you might be willing to come to an agreement on renewed payment terms or a payment plan, however if you’re willing to let them go, you can expedite the process and take stronger action sooner.
  • Open communication: It’s not enough to simply re-send an invoice and hope it will be paid, business owners need to be upfront and open with their expectations. “Tradespeople can be particularly bad at this, they’ll say ‘hey mate did you get that invoice’, rather than saying ‘our payment terms were XYZ and you’re now overdue. When will you be making payment.’” Record the communication and what was said, so there can be no doubt about what you’re asking for, and when you asked for it.
  • Agreement terms: Including terms in your payment agreements that you can report a business to a credit reporting agency for non-payment will assist in weeding out repeat offenders. Running a trade credit reference report and businesses credit score is vital before dealing with clients you don’t know or might be concerned about. A business who is paying their invoices on time won’t mind having such a clause in their agreement, but those who are repeatedly late or push the boundaries are likely not to engage with you. It helps you dodge the bullet.
  • Automate the process: Smaller operators with smaller amounts outstanding might feel like it’s not worth the time and effort chasing up non-payment. Use technology to work smarter, whether through automated notifications and demand letters or making it easier for your clients to pay via different means.

Businesses owners shouldn’t feel bad about asking for money that’s owed to them. There’s an uncomfortable feeling that comes from being owed money, as if it reflects on the worth of you and your business. But it’s your money and you don’t have to feel guilty about asking for it. Don’t let your emotions stop you from chasing what is rightfully yours.

Gus Gilkeson is the CEO of Grow Capital.