Irrespective of the industry you are in, you will come across clients who love your services and products but fail to pay within the due date. Late payments can disrupt your entire budget plan and lead to chaos in your account receivable department. Moreover, it is discouraging and creates stressful friction if not handled diplomatically. However, there are ways in which you can prevent late payments.
This post shares tips and suggestions on preventive measures against these situations and devise ways in which you can get your payments on time.
Late payments can happen at times for numerous reasons but there are steps which you can take to ensure your client pays on time.
Positive reinforcement is a great way to ensure your clients are motivated to pay on time. Offering a reward like a rebate for early birds will ensure that clients who pay early are rewarded and those who don’t, will want to.
Offering various payback options allow the customers the flexibility to pay the bills easily. This, in turn, leads to smooth cash flow. Expand the methods of payment you accept and the payback options you offer. Add payment options like “mobile billing” to give your clients as many options as possible so that they can try different payment options if one fails for some reason.
Setting the invoicing terms right from the beginning can clarify a lot of things. This leads to a better professional understanding between the company and the client. The terms are entirely dependent on you to decide.
Consider setting a term of additional late fees along with the payment after a period of wait time. A formal written contract is a good practice for several reasons: it establishes the professional relationship and sets the tone of future acquaintances, outlines the terms and expectations of both the parties involved. Lastly, it is proof of the work agreement and protects you in situations of non-payment.
Often business owners ignore late-paying clients for various reasons. It can be because they are unwilling to confront and offend the client or simply because they are too busy to keep track of the unpaid invoices. In such a situation, it is best to hire an account receivable service which will handle the confrontations on your behalf. Seeking the contacts of a representative of your client’s account payable department lets you follow up directly with the department regarding the pending payments.
A major drawback of asking advanced payment is that some clients may be unwilling to work with you as they will be apprehensive of the arrangement. A compromise is to ask for a partial advance which can be half or a certain percentage of the total amount. This will secure your investments for the job and at the same time, the client can be assured that you are going to do the work on time.
No matter what precautions you take, it may happen that a client is late with their payments for some reason. It can be due to genuine financial problems which you should consider to maintain a good professional relationship. However, the problem arises with clients who are chronically late with the payments and always have an excuse for delaying it. Here are a few tips to maintain a polite and diplomatic tone and get out payments successfully from them.
After the due date of your invoice is over, wait a few days or a couple of weeks and send the invoice along with an email. Keep the tone and language of your mail simple and polite. You can time the follow-up mail a week before the due date with a reminder, a mail on the due date enquiring about the status of the payment and if it is not paid, send another a week later asking about the estimated payment date so that you can follow up accordingly.
If a frequent client is late with their payments every time, give them a heads up that the services will be revoked unless all the back payments are cleared. Ensure, the terms of your contract are clarified enough so that the client will not simply discontinue your services and leave the payments due upon this warning. Make sure you take the necessary precautions before you incur a huge loss – in terms of labour, money and time. Following up your client’s account payable representative time to time is important to ensure they are constantly reminded of your dues.
When your client is unresponsive to repeated attempts to reach out to them about the payment, a physical demand letter is the most effective option. The letter should comprise of the following details:
It is best to be prepared for inevitable late payments. Plan your budget and expenses while keeping in mind that you may lose a certain amount of money. The tips on managing late-paying clients, if implemented well will ensure the losses are minimal.
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