Tips for Dealing With Late Invoice Payments
Preventitive measures you can take to the bank
Do you have invoices still outstanding? If so, then you are not alone. Every day, there are millions of small businesses out there that are not paid on time. The National Federation of independent Businesses states that late or slow paying customers are one of the most common causes of cash flow problems for small businesses.
So, what do you do when you have invoices still outstanding? And, how can you make the process a lot easier?
First Things First
Remember the quote, "Prevention is better than the cure?". If so, then that should be your motto when it comes to invoice related issues. It's a lot easier to avoid invoice-related problems if you know who you are dealing with. Thankfully, there is an easy resource for that.
The first thing you must do is to check the commercial credit of the business. These reports are an invaluable tool when determining if you should be handing out invoices in the first place. If a client of yours has good credit reports, then the chance of getting paid on time is multiplied many times over.
Another thing you can do is to use a well-written contract for each transaction. Don't cut corners on this. This means hiring an experienced attorney. At the very least, the contract should include payment expectations, how disputes are going to be handled, time frames and deliverables.
However, what about for instances that prevention is not a viable option?
If it's a client's first time, then you might want to ease on the throttle. An email will usually suffice, and make it friendly-sounding. This means, crafting your email carefully.
But what if the first email fails or the client is a repeat offender?
Show It Like You Mean It
It's understandable that you need your customers.
However, if you are in the habit of letting payments slide, not only it's bad for your business' finances, but you will also be taken as someone who does not mean business. Letting payments slide for some time is like providing a no-interest business financing for someone else. One way of showing that you mean business is by creating a system.
Before you start delivering the goods, you must have an established invoice follow-up system. The moment the payments are late for X amount of days, the first follow-up should be initiated, then the second after X amount of days after the first one, and so on and so forth. Be persistent. Make it casual at first, and slowly progress it to something more serious.
How you communicate with the client is different from how many times you follow-up. This means you can be friendly and casual with the way you communicate, but also aggressive on how soon and how many times you contact with regard to the late payment.
If you have made several attempts for collecting payments, but the issue is not progressing as you would want it to be, then it's perhaps time to call and ask "why" are the payments late.
Asking "Why" will force the client in a position to tell you the reason for late payments.
This forces the client to formulate an answer, and if the client realizes that the reasons are weak, payment will most be likely initiated. But that's not all.
Asking the question "why" will also uncover internal problems of the company as the issue will usually move to the "how" you are going to get paid. This will help uncover if there is a serious issue with the client's business.
Call The Professionals
Even though you follow the tips above, it's not 100% foolproof. If a client still avoids payment after a face-to-face meeting, then bring out the biggest gun in your toolkit - the professionals! In short, simply let a professional collection agency handle it. You are not in the collection business, so it's inefficient for your business to continually spend efforts on such.
Running a business means there are times that you will have invoices that are still outstanding.
Deal with it professionally and put preventive measures in place. When the damage is done, be friendly with your first contact, but make sure you communicate that you mean business.