How to deal with late paying customers
This article will cover how to deal with late paying customers. As much as you want to believe that all customers will readily pay up for the goods or services you provided them, this is not always the case. These customers can be someone you have never worked with before, or it could be one that is usually the ideal client, being as reliable as you need them to be.
Failure to receive payment can be frustrating, and it can cause increased stress, which could impact the productivity and performance of your business. When faced with a customer that has not fulfilled a payment or flat-out refuses to pay, you may be tempted to go to the authorities immediately.
This, however, does not always come with the results you want, which is why it’s worth considering alternative methods to explore beforehand.
Establish Clear Deadlines
A useful way of avoiding late payments altogether is to establish clear deadlines before beginning the work. Many businesses will use a standard 60- or 90-day limit to receive invoice payment. However, this is not a hard and fast rule, and you should choose something that works for you.
If 60 days is too long and could affect your finances (especially for freelancers), opt for a 30-day payment deadline. Even less time is acceptable if you are on a tighter budget.
You can use these deadlines to gauge the quality of the customer, also. They might find your request unreasonable, which could indicate a red flag, although you can still discuss with them which payment deadline would be more suitable and come to an agreement that suits both of you.
Do Not Feel Bad Requesting the Money
Broaching the subject of late payment with a customer can come with a range of emotions, and many businesses will tell you that they feel guilty about requesting the money. It is a sensitive subject, and one that you hope you would never need to engage in. however, if you have performed a service (and done so with zero complaints from the client), then you are rightfully owed that money.
Because of this, you should not feel bad about requesting it. You have earned it. Despite this, the intimidating feelings that come from bringing up the subject will get worse. In some cases, the client may have forgotten about the payment. There may have been an issue with their finance department or through the bank. You won’t know unless you ask, though.
Maintain the Facts
Facts are the most critical aspect when it comes to discussing late payments. With facts, you can maintain your point without allowing the discussion to crash off the rails, especially if the customer is trying to use intimidating tactics to force you to back down.
These facts can be tricky, though. No matter how sure you might be of the specifics, the customs could try to gaslight you by telling you imagined any conversations or agreements. To overcome this issue, it’s vital that you do your research prior to bringing up the late invoice payment. Gather all information, such as emails and other correspondence beforehand. You may also have a contract. Provide copies to the customer, and then go over the information within these documents with them.
Whilst discussing this, you can take breaks to confirm that the customer agrees with the information presented, and it’s also vital that you remain calm during the proceedings. With facts, you make your case indisputable, which shows you are serious, and it can also help clear up potential miscommunications.
Be Prepared to Listen
Not all instances of late invoice payments are malicious, even if they can be inconvenient. This is why making sure you listen as much as you speak is essential for mitigating conflict, and finding a solution to ensure you get paid for your services.
Your client may have legitimate reasons for failing to pay, but if you go in with the wrong attitude, you do not allow them to explain. These reasons could include them waiting on another payment for them, or it could be that there was a miscommunication within their office.
Taking the time to listen and being compassionate can make the client more willing to find a solution that will enable them to pay their invoice.
Of course, there is always the chance that the client is being dishonest. If you suspect this, you will at least have something to base the next stage of your procedure to ensure you are in a better position to receive your payment.
Explain Your Expectations
Ultimatums will help you deal with late-paying customers and remove uncertainties on their end over what you want or need from them. However, this ultimatum should not come across as a threat, as this seems unprofessional. Instead, explain to them what you expect – full payment by a specific date – and then make it clear what will happen if they fail to pay up.
Even if the customer agrees to this, there is still a chance it may not happen, which is why you must outline your intentions should they fail to fulfil the agreement. Often, this will motivate them to make the payment, but it does not always work.
Pursue Legal Action
Pursuing legal action should be the last resort when it comes to overdue invoices. However, as you are owed this money, it is all you are capable of doing. There will reach the point where you realise reminders and emails will get you nowhere, so you will need to get in touch with a collection agency to take the reins and solve the problem for you. Of course, this is not something you should do immediately.
You will be in a stronger position if you make it clear beforehand that contacting legal representatives and agencies is what you intend to do if the customer does not make the payment.
Getting What You’re Owed
All businesses deserve to be paid what they are owed. It does not matter if you are a freelancer, a small business, or one that is already established. Misses payments and overdue invoices can have severe financial effects on your company. With this in mind, you must understand the most appropriate measures to take when dealing with late-paying customers.