Cash-flow is the back-bone of any business and one of the problems with being in business is that the work isn’t really finished until you get paid. The issue of late payment of invoices is not a new one but it is a growing problem that could spell disaster for many Private Investigation Agencies out there that are experiencing problems with clients paying on time.
Howard Pinkham, of System One Solutions, a private investigation agency situated in Cheshire, spoke to PI Telegraph recently and has this advice for anyone experiencing problems with late payment.
“Solicitors and law firms are the main client for many PI agencies and when it comes to paying for services they tend to be at the top of the list where late payment is concerned. It is not only the legal- aid solicitors that pay late; many solicitors that don’t undertake legal aid work can often pose a problem too”, explains Howard.
Howard continues by explaining that one of the problems is when a solicitor receives an invoice they routinely do not pass it through their accounts system immediately; instead they place it at the back of the client’s file and will only deal with it once the case is concluded. This can often be many months after the PI agency has concluded its work. You can imagine that this is a very unattractive proposition for any small or medium size business and is guaranteed to cause problems with cash-flow.
Howards say, “The ‘pay when paid’ philosophy is a problem in many industries and the PI industry is no different. In the construction industry it is actually illegal to do business in this way. Client relationships are often soured when excellent service has been provided and your client is ‘over the moon’ but you don’t get paid”.
So how can we get around this problem?
Howard goes on to explain that, “Many businesses think they are obliged to extend 30 days credit to their clients but this is not the case. All our invoices state ‘payment due on receipt of invoice’ and there are good reasons for this. If you allow your clients 30 days your very best clients who want to keep you sweet will send your payment on the 30th day so by the time you receive the monies they will actually be overdue”.
“On the other hand, the same clients will actually pay you on receipt of invoice if they understand these are your terms. If you allow 30 days you cannot chase payment until it’s overdue so you have no idea if it has been passed for payment or even if they have actually received it but if your terms state ‘payment due on receipt of invoice’ you can chase payment after 5 days and surface any problems at an early stage”
Howard explains that a business must have robust terms and conditions of payment and they must be clearly stated on any invoice that goes out. That will leave clients in no doubt what they must do in respect of timely payment and also outlines your business policy if your terms are not met.
“In the past we have worked for the largest solicitors firm in our area with 150 solicitors but as we have had to threaten County Court Action for late payment we don’t work for them anymore. At first glance, maybe it’s our loss but we don’t need clients who don’t pay on time, it is just a threat to our business and our livelihood and it just doesn’t make good business sense to continue a business relationship with them”.
Excellent advice from Howard. It would be great to hear from others who have experienced difficulties in getting timely payment from their clients and how they managed to get around the problem.
Howard Pinkham is the Owner of System One Solutions a private investigation agency and legal support service provider situated at System One Solutions, Oaklands Office Park, Hooton Road, Hooton, ELLESMERE PORT, CH66 7NZ, Tel: 01513 242490
Follow Howard on Twitter : EnglandPI