Dealing with late payments is time consuming and challenging particularly for a small business owner. Receiving payment late can have a negative impact on your cash flow and chasing late payers can take up invaluable time which could be spent on the many other jobs that need to be completed.
Contracts must include Terms and Conditions for Late Payments
Ensure that contracts are drawn up with customers which have all terms and conditions relating to late payments. The interest charged on late payments and any costs arising from action taken need to be included in the Contract T’s & C’s. Inform your customers of all the conditions surrounding late payment so that they are aware of them at the start of the business relationship.
Monitor Communication with Customers
Your customers are important and monitoring your communication with them will strengthen your business relationship. Once you have built up a frequent line of communication with them you should experience a hassle-free business relationship. When the time comes to send out the customer’s invoice, you should already know who will be responsible for payment and how to contact them. The invoice should be sent via email so that you have a date and time record for future references. Follow up on invoices and ensure that the customer is happy with it and can give you a set date as to when it will be paid. This should minimize excuses for late payment. If any issues with the invoice arise keep written notes of all changes for future records. This will ensure that no disputes can be made to delay payment.
Customer Excuses for Late Payment
Recurrently customers will make excuses to delay payment of invoices. Various ways in how to deal with late payers shall be examined.
|Customer has not received invoice||Confirmation of receipt of invoice was via email with written date and time|
|Customer’s accounts system is not working now||Confirmation of receipt of invoice and date of payment giving customer firm but diplomatic solution|
|Cheque sent but lost in post||Give customers other payment options – electronically, via bank transfer or PayPal|
|Person responsible for payment away/ill||Keep good communication with person responsible for payment with frequent contact. If they are unavailable try emailing them to request payment in case a mistake has been made in the first instance.|
|Company experiencing financial trouble||When payment cannot be made request monthly payments to ensure payment eventually made|
|Customer waiting for payment from own clients||Be firm and request exact date of payment as soon as possible otherwise further action should be taken|
Send Reminders to Clients
Reminders are a great way to be diplomatic about late payments. If you have still not received payment, call them and request payment in full. Remind them of the T’s & C’s of their contract and that interest can be charged for late payments. Customers are obliged to pay for all work completed in full under UK law.
Emphasize Action that can be Taken
If payment is not received after all the above steps have been taken, then it is time to enforce action. If your customer refuses to pay you than you should take legal action. They may however, come around and promise to pay you immediately if you waive all interest incurred and promise to drop legal action. It is important to deal with this type of customer in a professional but firm manner.