Late payment or non-payment of invoices is one of the biggest problems that a plumber can face. 2016 research from EC Insurance Company (ECIC) showed that late payments were an issue for 62% of British plumbers, and with Ormsby Street research showing the average overdue invoice to a small business is worth more than £6,000, the size of the issue is clear.
For a plumber working in the commercial or industrial sectors, a big contract can seem like a real step forward for the business. But just because a company is a household name, or that the deal is a big one, that does not mean invoices will be paid on time.
Late payment impacts cash-flow, payment of staff, the ability for a plumbing business to grow and expand, and even its very survival. Sadly, it’s not enough for plumbers to just hope for the best that they will be paid on time, and there are a number of measures to be taken that can protect them against it.
Conduct a financial health check on EVERYONE you work with Ormsby Street data analysis has revealed small businesses that credit check their customers are around 30% less likely to go out of business in their first year, than those who don’t credit check.
So plumbers should check the financial health of every single supplier and customer that they work with. This sounds onerous and time-consuming, but it really isn’t. It can be done via Companies House or there are free tools that do it for you, looking at how long firms take to pay invoices, providing the relevant background about what the data means, and helping plumbers make the right decisions about how to proceed.
Be firm about your payment terms
Most plumbers work to 30 day payment terms. That’s fine, but when setting that out it needs to be made clear that late payment is not acceptable. Talking openly about payment terms early in the contract discussions is important in getting across the message that you won’t stand for late payment.
Don’t worry about chasing for payment
Fact – no one really relishes chasing customers for overdue payment. Plumbers are busy and it can feel like the last thing they want to do. There is also the fear that to chase for payment is somehow rude
or inappropriate, and that to do so might cause a customer not to use that plumbers services again.
That’s highly unlikely. If they are happy with the service then they will return. If you are owed money then it is your absolute right to request payment until you get it. Chasing for payment demonstrates that
you run your business properly and if your customer relies on dodging their obligations as a matter of course, your business will suffer the more you work with them.
Further information visit www.ormsbystreet.com