If you run your own business, chances are you will at some point encounter a non-paying customer that won’t pay their bills.
To protect your business from getting into debt or running into other financial difficulties, it’s important to ensure you have a process in place to manage late payments.
When customers are late paying, it can feel a little awkward repeatedly asking them to pay up, but remember, you have provided them with a service and you are entitled to be paid for your work!
Of course, there could be a perfectly reasonable excuse for a late payment, so always approach the subject in a friendly manner and with an open mind. Avoid going in all guns blazing, retaining a good relationship with your customers is important too.
The key to handling late payments is to be organised and professional with your approach.
Create a structured process to avoid late payments
Communicate your payment terms clearly from the start
Discussing and agreeing on payment terms with customers early on can help to avoid problems later down the line. Make sure that both parties have complete clarity over what costs are involved and when and how these costs should be paid.
Put it down on paper
Get your payment terms down on paper or in a digital document and make sure all your clients have a copy to refer to.
Make it legally binding
Include your payment terms alongside all your other terms of service in a legally binding contract, to protect your business and to deter late payments.
Dealing with late payments
Are payments still going overdue? Here are some tips for chasing up late payments.
Be on the ball
Don’t let payments get really late before you start chasing. If your client knows you will call as soon as the invoice goes overdue they’re more likely to try to pay on time to avoid the call.
Stay professional and don’t be apologetic
Don’t ruin your relationship with a customer over a late payment. If possible keep things friendly but don’t feel shy about being persistent.
Remember that you’ve provided your customer with a service and now they’re the ones not holding up their end of the bargain, you’re perfectly within your rights to chase up payment.
Pick up the phone and speak to the right person
It can be tempting to hide behind emails when the subject matter is a little awkward, but a telephone call is usually more effective. When you do get through, if your usual contact isn’t the person who puts through payments, ask to speak to the relevant person or department. Relying on other people to pass the message on can delay things further.
Request a payment date
When chasing a payment don’t accept a vague response. Ask for a date when you can expect to receive the payment by and advise that you’ll call back if there are any problems.
Setting out payment terms with clarity from the start and being organised with an efficient and professional process for chasing late payments can help to forge a smooth working relationship.