How To Avoid Late Payments & Get Paid Faster
On the surface, late payments don’t seem like too much of an issue. As long as the money ends up in your account at some point, everything’s fine—right?
The truth is that late payments hurt your business in more ways than you might imagine. A recent study by Direct Line shows that 81% of tradespeople are chasing late payments totalling an average of £6,210. When we looked into our software, we found a very similar number of £6,256.05.
Late payments cause poor cash flows, and chasing customers wastes your time. In this article, we’ll discuss how big the late payment issue actually is in the world of plumbing & heating, as well as what you can do to ensure you get paid on time and without having to endlessly chase customers.
How big is the late payment issue?
To get a better picture of how big a problem late payments are in the plumbing and heating industry, we ran a quick study. Chances are, you aren’t alone.
In a three-month period, around 250,000 invoices were sent out through Gas Engineer Software. The graph below shows the rate they were paid over the next 3 months after their issue date.
KEY TAKEAWAYS
- After 14 days, 48.69% of invoices were paid.
- After 30 days, 61.95% of invoices were paid.
- After the full 3 months, only 76.82% were paid.
Why are late payments bad for your business?
Late payments are one of the biggest causes of stress and cash flow problems for businesses. According to research from Barclays, up to 25% of business owners say they haven’t been able to take a holiday in the past couple of years because of money tied up in unpaid invoices.
On top of this, chasing late payers adds a significant amount of admin workload to your already busy schedule. Having to contact, keep track of, and check up on unpaid invoices is never going to be an enjoyable or quick task.
And lastly, an unstable cash flow can make it difficult to hire new employees and go through with planned investments into your business (such as a new van, set of tools, analysers, and so on).
How can you start getting paid faster?
The good news is that there are many strategies you can use to start getting paid faster – and they’ll save a good chunk of your time, too. Here’s a summary of the most impactful:
1. Add clear payment terms to your invoices
This one sounds simple — but it works. If there’s no specified payment date or the customer isn’t sure how to pay, invoices can get put to one side and forgotten about.
This can be easily done with Gas Engineer Software by simply adding your payment terms in settings. Then, it’ll be automatically added to all your invoices.
You could even experiment with arranging a late fee policy, although this is not typically necessary for domestic work.
2. Send payment reminders
Most late payments are not done maliciously. Often, people just forget or put off paying the bill. Simple reminders really do work and can be all that’s needed to nudge a customer to pay for an invoice.
That being said, we know how awkward it can be chasing up for payment, let alone the sheer time wasted on it. Nobody likes chasing customers up – the trick is to automate the process with software while you get on with your job.
Gas Engineer Software is great for this, and will send out up to 3 sequential invoice reminders that you can personalise and specify when they’re sent. For example, you could set the first reminder to be sent after 10 days, a second after 15, and a third after 20.
Here’s what the customisation options for paymenrt reminders looks like:
And they really do work:
Our data shows that businesses using Gas Engineer Software payment reminders get paid 64% faster.
3. Offer multiple payment options
There are several ways you can get paid, each with pros and cons.
🟠 Cash and cheque:
The classic payment method that will always be a favourite for some businesses and customers. You know the benefits—but these days, more and more customers are leaning towards the convenience of digital payments.
🟠 Card payments:
A quick and efficient way to get paid, but with 1-3% fees that can add up in the long run.
🟠 Bank transfers:
Get paid instantly without fees. But they’re also the most time-consuming option for your customer. They have to find your bank details, log into online banking, and make the transfer – meaning it’s rarely done on the spot.
🟢 Digital payment options:
New payment options allow you to get paid instantly without unnecessary fees. For example, Gas Engineer Software’s integration with Crezco allows your customers to pay via a link or QR code generated with your invoice. Fees are £1 for any invoice, no matter the amount.
If you want to get paid fast, the most important thing is to offer multiple options for your customers so they can choose what they prefer.
Learn more about QR code payments with Gas Engineer Software.
4. Send invoices on the same day
A very simple but effective way to get paid is to ensure invoices get sent out on the same day.
Some tradespeople prefer to wait until the end of the week and do it all in one batch. This might work for your schedule, but it gives your customers the impression there’s no rush to pay.
Again, software can help speed up your workflow here. Gas Engineer Software can generate invoices at the click of a button from a previously created quote, meaning you can even send out invoices in the field as soon as the job’s completed.
5. Communicate clearly
Customers appreciate fast, polite, and effective communication. Together with the quality of your work, these small interactions help build up a good working relationship with a customer. And, the more the customer likes you, the more likely they are to respect your work and pay on time.
Streamline your workflow with software
It’s not just about getting paid — you can easily save time with your certificates, scheduling, and lots more on Gas Engineer Software.