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How to Handle Late Payments

If you own a business then keeping on top of your finances is essential.  A healthy cash flow is vital for a healthy business so you need to make sure that your customers or clients pay as quickly as possible.  However, it’s sometimes the case that payments are late and the first thing to do is to send an email to remind the customer.  After all, one late payment could easily be an oversight and you’ll probably get an apologetic email in return and the amount due will be settled forthwith.  The sooner you get in touch with the customer to work out the payment arrangement the better chance you have of getting paid. 

When you invoice clients or customers it’s a good idea to clearly set out the payment terms with a definite date for payment.  It’s also possible to operate a policy of charging for late payments – this could be a small percentage added to the overall bill and would serve as a deterrent to late payment.  This should be clearly stated on the initial invoice and the penalty for late payment would go a long way towards reimbursing you for the extra administrative work involved in sending reminders and re-invoicing.

Nonetheless, most business owners will come across clients or customer who don’t pay no matter how many reminders they are sent.  If this is the case, you need to stop shipping products or providing services immediately until you can actually speak to the customer (by telephone or face to face) to find out what the problem is.  If you can work out a payment schedule that is suitable to both parties, then that could be the end of the problem for you, but this isn’t always the case. 

Sometimes you’ll come across a late paying customer who has moved or, in the case of commercial account, has gone out of business.  In these cases you should have some sort of paperwork somewhere that will be the equivalent of a signed contract or a signed purchase order or an agreement of some kind.  You can use this documentation to instruct a debt collection agency to go to work on your behalf to recover the monies owing to you.  The more information and documentation you can provide to the debt collection agency, the better chance they will have of recovering the sum involved.

Using a debt collection agency to recover these payments may seem harsh but it’s pretty harsh on you if you’re not being paid for products or services supplied to customers.  After all, you’ve gone into business to make money and if customers are not paying then it’s having an adverse effect on your own income and profits.  While many would advise you that the cheapest way of recovering a debt is through the Small Claims Courts, this costs money and takes up time that could be better spent on growing your business.  Using a debt collection agency that specialises in commercial solutions means that you’re using their expertise and experience to do the job, rather than attempting to do something that you have not been trained for and have no experience of.