Sick of late payments? Inna Kaushan, CEO and co-founder of Solna, explores how automated invoicing and credit scores can help electricians avoid awkward encounters, as well as mitigate any pain to their pockets.
The self-employed, sub-contractors, and sole traders, together with other small businesses play a vital role in the UK economy. In the last 12 months, almost three million people (around 10% of all those in work) have been engaged as freelancers or under self-employed status.
As an electrician, whether you are self-employed or running a small business with a few employees, you’ll know that one of the major challenges is getting paid on your contract terms.
This is highlighted by recent research which reveals that only 19% of freelancers and the self-employed are paid on time, with related invoices being paid on average 18 days after their due date. In addition, nearly a quarter of UK businesses report that late payments are a threat to their survival.
Precious time spent chasing payments could instead be used for getting your next contract.
The stress of admin
When you are working for yourself, you have a lot of admin to do. It can be quite stressful, creating uncertainty about not getting paid, alongside anxiety for some about having to manage and maintain your admin and cash flow. This is an increasing problem, with recent data showing that 52% of SME owners across business sectors blame poor cash flow for a negative impact on their mental health.
However, these issues can be solved by recent advances in cloud technology, which lets you automate your invoicing, conduct frequent credit checks on clients, and set up reminders for overdue invoices. Cumulatively, this allows small businesses to add efficiencies to their cash collection, as well as helping avoid the worries associated with late payments.
Check your customers’ credit status
Checking and monitoring the credit scores of customers can be an effective way for small businesses to have up-to-date information on their clients’ ability to pay their bills. A credit score is a numerical indicator of a consumer or business’s ability to service debt. They are based on several factors such as records of servicing credit, County Court Judgements (CCJs) and a history of applications for credit.
These were once the preserve of large businesses. But as you’ll be aware from all the TV advertising, consumers are increasingly becoming familiar with the idea of credit scores. These give them the tools to manage their own credit scores, which in turn helps make sure that they can access a wide range of personal finance products.
This increasing availability of information has created an opportunity for self-employed electricians and small businesses to become savvier about how credit scores work. This has resulted in established credit scoring companies offering the service to a wider customer base.
These companies allow smaller businesses to check on the financial health of their customers, and subsequently provide them with the insights and indications into how long both new and existing clients will take to pay them. This technology also helps them to identify any adverse changes to their credit activity.
Using automation to reduce the admin burden
Processing invoices is cited by many as being one of their top five administrative burdens. 29% of those surveyed by the Association of Independent Professionals and the Self-Employed (IPSE) listed it as being a task which could otherwise be spent on winning or completing new work.
Whilst many still generate invoices with their own basic Excel or Word templates, there is now a choice of cloud invoicing tools on the market which can save you time in processing invoices, as well as chasing for associated payments.
Cloud invoicing, either used as a feature within cloud accounting software or as a stand-alone tool, allows you to create invoices on the go from smart devices, include direct payment options, monitor open rates and set up automatic chasers.
Additionally, the fully customisable features of cloud invoicing allow you to stamp your own unique identity and brand on your paperwork. All of which can help make you stand out and be remembered – perhaps when a new contract comes up.
These services can help you reduce the time spent on chasing late invoices and help with managing cash flow due as payment is collected sooner.
Further productivity gains are possible
There are several options on the market for cloud invoicing and credit score data, however, using one solution to take care of both of these can create further productivity benefits through saved time.
Using an all-encompassing product aggregates information from both invoice and credit score data, which provides enhanced insights into the likelihood of how customers will behave and their ability to make payments. This information can then be used to collect payments faster through a combination of both human intervention, as well as automated reminders.
The issue of late payment is a pertinent one for electricians who may well spend an average of around 20 days a year chasing invoices (the average for freelancers). So, anything that can be done to reduce this time, and speed up how quickly payments are received, can only be a positive.