The manufacturing industry is one of the worst impacted industries by late payment - but how do you go about counteracting this?
Manufacturing is an industry that relies on credit - it’s how it’s built. It’s also reliant on supply chains, meaning if one supplier pays late, all links within the chain are impacted. It becomes a domino effect, with each supplier paying the next late, until the one right at the end suffers the most. So, how do you, as a manufacturing business, go about improving things that are seemingly out of your control?
If you have a better relationship with your customers, it’s easier to chase invoices. It sounds simple enough, but it does take work. It’s vitally important - not only will you know your customers and suppliers better, allowing you to discuss changes and improvements with ease, but it will also allow you to chase invoices far more efficiently. You’ll know who to direct your queries to, and who to chase for payment.
Although it isn’t always the solution, it can be a good idea to shorten your payment terms for some (or all) clients if it's viable. Revisit the contracts you use as a business and use a software like itsettled to see how long it takes for customers to pay you. If any customers jump out, then decide if you want to shorten their payment terms - even if it's just by seven days.
If possible, ask for a percentage of the invoice up front. This shows commitment to a purchase, and can also help with cashflow issues, as you’re getting some of the money in advance. You may feel awkward, but discuss it with business colleagues and contacts, and you may find advice from others. It is particularly helpful for new customers - and ensure that you credit check them at the same time.
The prompt payment code was set up by the office of the Small Business Commissioner, which in turn was created by the UK Government in 2016. It is a public document which businesses can both view and sign, in which they pledge to pay their invoices on time. Read the full list of signees, and consider working with them in future. You can also sign it yourself, and encourage other businesses to do the same.
If you aren’t already, ensure that you’re sending invoices electronically. Consider adding a quick payment link or method to ensure payment is as smooth a process as possible. This can either be done through a QR code based system, or through another payment portal method. You can still send physical invoices, but don’t rely on them alone - use both to ensure you’ve got a digital trail if anything goes wrong.
The best thing you can do for your cashflow is to use a piece of credit management software such as itsettled. It sounds simple - and that’s because it is. itsettled is an automated credit control software that collects your invoices faster, meaning there’s more money in your bank account. We offer integrations with all major accountancy platforms, allowing you to spend valued time on other tasks. Try us for 7 days for free.
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