Persistent late payers really do get you down. Initially it’s a minor annoyance but over time it becomes very frustrating, no matter what size the debt is. The longer it goes on the more the trust disappears between you and you customer, and that’s not healthy going forward.
You’re not alone, many businesses have late payers: the type of customer that will pay up eventually, but not until you have spent hours chasing them, adding more frustration and cost. The most important thing to remember is that unpaid invoices quickly drain cashflow and you need to keep on top of them, but how?
Keep on top of things
Keeping your debtors list up to date is key. It’ll identify clients that frequently pay late so you can put them to the top of your list to chase as soon as the payment due date arrives. Try to prevent late payment by giving them a call and making sure they have your invoice and know that it’s due for payment. You’d be surprised the number of bad payers that say, “I haven’t received your invoice”, or “I’ve lost your bank details”.
Chase debts and don’t give up!
If you’re using Cloud software like Xero you can link it to Chaser to automatically chase invoices for you. This can be set up so the emails look like they are coming directly from you, and can be escalated over 30, 60 or 90 days automatically.
Another option is to allow your customers to pay you online. Payment gateways like PayPal and GoCardless are great for this and, you even add a payment link to these services on your invoice. That means your customers can then just click to pay you online via their bank account or credit card. No excuses.
What about those who genuinely can’t afford to pay?
Unfortunately, you do get customers who at the time won’t tell you they can’t pay and will proceed to buy goods or services from you. The due date will pass, you call or email them chasing the debt. 9 times out of 10 they reply saying I’ll sort it in the next week or so. Then they don’t, so you end up chasing them again.
Eventually you find out they can’t pay! In this case demanding immediate payment is ineffective. Instead, look at arranging some kind of payment plan, where they pay in instalments. That way, your cash flow won’t be as badly affected as it could have been.
Set up a monthly direct debit
For customers who buy goods or services regularly, you can avoid late payments entirely by setting up a direct debit. Setting up repeat invoicing can also save you a lot of time and hassle. Xero and GoGardless can comfortably handle this all for you, meaning you don’t have to lift a finger.
Best excuses for late payment and how to respond
Excuse: “We haven’t received your invoice.”
Solution: Resend the invoice by email and give the client a call to confirm they’ve received it.*
* If you’re using Xero, you can see whether or not clients have opened an invoice!
Excuse: “Your cheque is in the post.”
Solution: Have a policy where you don’t accept cheques and people have to pay by direct debit of BACS. It’s 2019!
Excuse: “We haven’t been paid yet.”
Solution: If the above is genuine, ask your customer to make stage payments until the debt is paid.
Excuse: “The person who authorises your payment is not in the office today.”
Solution: “No problem. What date are they back? I’ll give them a call.”