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Dealing with Late Payment from Commercial Clients

When it comes to payment schedules, there’s nothing more frustrating that customers or clients who do not settle their bills within an agreed timeframe.  If you’re an SME owner who regularly invoices commercial clients you’ll be aware that some of these will adhere to an agreed payment schedule and you can be sure that the payment is settled in a timely manner.  However, you’ve probably dealt with clients who delay payment, leaving you with little choice but to spend your precious time and energy on following up in order to get them to settle their bills.  This can result in cash flow problems that have an adverse effect on your business and, in some cases, results in bankruptcy for the supplier!  Today we’re going to take a look at some tips you can use to chase late payments and secure your company cash flow.

To begin with set your terms and expectations at the beginning of your relationship with each customer, outlining a time frame within which you expect to be paid.  The standard term is 30 days and you should add this information to your invoice template so that each customer is informed of the payment terms each time they receive your invoice.

Some business owners charge interest on late payments – for example an extra 2% after 30 days, then an extra 3% after 60 days, etc.  Some business owners stipulate a 5% delayed payment fee and the initial 5% can be added to each recurring 30 day period until the full amount has been received.  Whilst this may be a great way to ensure payment, it could have a negative effect when it comes to building trust in a business relationship.

If payment has not been received within your stipulated time frame, you’ll need to follow up with the client in a polite and friendly manner (after all, if this is a regular client you need to maintain a good business relationship with then for future transactions).  Put together a concise, friendly script that can be used as a follow up reminder.  For instance:

“Hi John,

This is a friendly reminder that Invoice 47 is no due for payment.  I would really appreciate if you could settle this at your earliest opportunity.

Regards, Kate”

Keeping a template for this means that you don’t have to spend time thinking about what to write as you follow up late payments – just use the template and alter it where relevant for the individual email or letter you wish to send.

If payment is not secured after you’ve sent a friendly reminder, it’s time to get in touch directly with your client.  Pick up the phone and call – sometimes a chat is all it takes to secure the payment – keep phoning every other day until the sum has been paid.

Find out who deals with payments within your client’s company and contact them directly – some invoices remain unpaid merely because they haven’t been sent to the correct person.

Remember to use discretion when chasing late payments – your clients are only human and they will have a busy life, just as you do.  Some clients just need a gentle reminder whilst others may be experiencing cash flow problems themselves as they wait for payment from their client.  Talking to the client means that you can find out why the payment is late and perhaps come up with a different payment schedule to clear the arrears.