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Late Payment and How to Deal with Excuses for SMEs

Last week we took a look at dealing with debtors and published some tips that SME owners could use in order to secure payment.  With late payments representing a continuous challenge to SME owners and potentially having a severe adverse effect on maintaining a steady cash flow, today we’re going to take a closer look at some of the excuses that are often given for making late payments.

·        The Cheque is in the Post – this really is the oldest excuse out there when it comes to late payments.  If you’re faced with this excuse put your creditor on the spot and ask for the cheque number, the date is was sent (and whether sent by first or second class post) and the precise amount written on the cheque.  Take notes of the debtor’s responses to these questions as you may need them to re-issue the cheque if it doesn’t arrive.

·        Customer Dispute – if there is a dispute then it’s a good reason for the customer to delay payment and you will need to find out exactly what the problem is in order to facilitate a speedy resolution and secure payment.  Make sure that you keep a log of all correspondence with the customer, including their complaint, your acknowledgement of it and what you intend to do (or have done) in order to rectify the situation.

·        Invoice not Received – this is another well-worn excuse and, if you send invoices by post, it’s a good idea nowadays to also email the invoice to the customer as you can be sure of delivery.  It’s always a good idea to telephone the customer seven days after sending the invoice to confirm that it’s been received and to check that they are happy with the goods or services provided.

·        Waiting for Payment from their own Customers – this is challenging and, as a small business owner yourself, you’re likely to sympathise with your customer and understand their position.  Try talking to the customer to see if they can come up with a plan to make an immediate part payment or to pay in instalments.  Offer to take post-dated cheques that are dated at intervals acceptable to both parties.

·        Authorised Signatory Absent – ask if there are any pre-signed cheques available that could be used to make the payment.  If not, establish an exact time frame for when the person will be back at work and make sure you phone that person on that day.

·        Error on the Invoice – this could be the invoice number, the wrong price, wrong company name, etc.  This is why it’s so important to ensure that your invoicing documentation is accurate as any errors will give your customer a valid excuse for not paying or delaying payment.

·        Company in Liquidation/Receivership – find out for sure if the company is in “formal insolvency” (liquidation, receivership, bankruptcy, IVA, etc.) and ask for contact details for the insolvency practitioners dealing with the administration of the case so that you can contact them direct and lodge a claim immediately.

 When a customer payment is late, the sooner you contact that customer to discover the reason, the more likely it is that you can come to a solution that suits both parties.  Keep lines of communication open and you’re more likely to receive the payment without having to resort to using the services of a debt collection agency.