Protecting your business against late payments during coronavirus

The coronavirus outbreak is putting a major strain on many small businesses' cash flow. iwocaPay is designed to ease such pressure, providing finance at the point of invoice, for the buyer and seller, to ensure payments can be paid on time.

19 March 2020

In times like these, many small business owners are worried about what the next few months will bring, including whether they'll receive payments on time. With the economic uncertainty surrounding COVID-19, cash flow is more important than it’s ever been to small businesses, but many are experiencing sudden shortages of work and are struggling to pay invoices on time.

But it’s a Catch-22: you might be looking for cash to help keep your business afloat, but your customers will likely want more time to pay, to help them manage their own cash flow. So, how can you keep doing business when the system starts to break?

At iwoca, we’re committed to making sure we can do everything we can to help small businesses through this turbulent time. So, we’ve created this quick guide to avoiding and handling late payments in a crisis. We’re also launching iwocaPay, a way of giving your small business customers 90 days to pay your invoices while you get paid up front.

Proactively follow up on your invoices

If your customers are in an industry heavily affected by the Coronavirus, you should contact your customers now to remind them of your invoice and discuss whether they’ll be able to pay on time. This will help you understand what your incoming finances look like, and whether you need to account for a late payment.

You should also consider reminding customers about upcoming payments. Sending an email a week and 24 hours before an invoice is due will remind customers to pay their invoices on time or let you know if they’re struggling. If you’re using an accounting tool like Xero or Quickbooks, you can set up automatic invoice reminders to send to these customers.

If your customer has missed a payment, give them a call as soon as possible – the personal touch may well help you reach a solution you're both happy with.

Offer an incentive for early payments

If you’re concerned that your cash flow is about to run dry, you could talk to customers that owe you payments and offer them a discount if they settle early. Customers that can afford to do so might appreciate the discount in these uncertain times, and you’ll have the added security of being paid sooner.

A typical settlement discount is a 2% reduction on invoices paid within 15 days of receipt. You’re entirely in control of how much you offer your customers, though, and it will usually depend on the value of your products and services, and how generous you can afford to be.

Make sure you manage your risk effectively

It's important to assess whether customers are at risk of paying late before entering into an agreement with them. Public sources like Companies House can tell you a lot about a business. A key factor to look out for at the moment is whether a customer’s industry has been impacted by the pandemic. If this is the case, get in touch to express your concern and discuss a plan for payment.

If you want to do a full credit check on your customers, paid services, such as Equifax, CompanyCheck, CreditSafe and Experian provide a range of detailed information including the company’s credit score, their payment performance, and whether they’ve received any County Court Judgements. This is useful information, but you do need to pay for it: Experian charges £25/month, whereas CompanyCheck charges about £10 per report.

If your research indicates they’re a riskier customer, adapt your payment terms to protect your businesses. Asking for a deposit or only handing over the completed work or goods once you’ve received full payment are good ways of protecting your business without having to turn down a customer.

Let iwocaPay take the burden of payment terms

We know that in the middle of a crisis, the last thing you want to be focussing on is chasing up late payments. So we’ve launched a new product, iwocaPay, to help ease the burden on your business throughout this troubling time.

iwocaPay acts as a new payment method for your business. You’ll get paid up front for your invoices while your customers spread their costs over up to 90 days. iwocaPay takes on all the credit risk and admin so your business is protected from bad debt and late payments. That way, you can focus on your business while we take care of your payments.

Sign up and we’ll contact you with more information about how you can offer iwocaPay to your customers.

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Liv’s a Senior Product Manager at iwoca, working on iwocaPay, our new invoice finance product. Before that, she led the team that built iwoca's CRM system from scratch. If she gets a break from all of that, Liv moonlights as iwoca’s Poet Laureate, or you might find her rock climbing in south London.

Article updated on: 7 October 2020

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