It feels like an inevitability of business that you’ll forever be chasing bad debtors. Either your customer or client runs into cashflow difficulties, they simply don’t want to pay up, or simply forget.
Whatever the reason, you’re given flimsy excuse after flimsy excuse until you take legal action or let the debt go.
While an awkward and unappealing task, chasing bad debt is important, but have you ever considered that the time spent chasing these invoices is actually costing you more money than you could gain? Hear us out.
Over £6million is lost every year through bad debt chasing.
Gravitate Accounting spoke to over 500 business owners, and 70% of them are losing three days each month trying to claim money owed to them. This may not sound like much, and business owners may think that the small time investment is worth it to obtain funds that rightfully belong to the business, but you’d be surprised at how quickly this adds up.
70% of UK-based Businesses are losing over a month every year chasing invoices. Consider the daily salary of the average business owner, and that equates to more than £6million. For each business, that equates to a £6,750 loss every year. Those three days a month don’t seem so worthwhile now, do they?
So, what’s the solution? You can’t keep spending money trying to claim the money, but you can’t really, and shouldn’t, let bad debtors off the hook.
How to save money and still claim bad debt
There are three simple things you can set up once that will save you time chasing bad debts in the long run and increase the chances of clients and customers paying you on time.
Set up accounting software
The first thing we would recommend is setting up accounting software. Just over 15% of UK businesses we spoke to haven’t done this, which means you’ll be spending a lot more time than necessary gathering together all the information you need to file a tax return, forecast cashflow, manage business budgets and more.
Utilise bank feeds
Secondly, make sure that your bank feeds are directly linked to your accounting software. Manually adding this information in yourself, even if you’re copying and pasting, wastes precious minutes, and as you can see from above, every minute counts in business. It sounds simple, but our survey revealed that more than half of companies don’t do this.
Use accounting apps to speed things up
Thirdly, consider linking accounting apps to your software; we highly recommend Xero as there are plenty of ways to automate invoice chasing. Focusing on Xero, you can set up personalised and automated invoice payment reminder emails that are automatically sent to late payers, meaning you don’t even have to think about it, let alone spend time chasing yourself. The app can also send out emails in the weeks leading to an invoice payment deadline, increasing your chances of being paid on time. And because it’s linked to your accounting software, everything is automatically updated for you when a payment is made.
These are straightforward steps that would save your business thousands of pounds every year. Money that could be invested straight back into your company.
