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Repeat Customer Late Payment – How to Solve the Problem

According to recent research, one of the most common reasons that small businesses neglect to chase bad debts is they find the process “uncomfortable” or are wary of antagonising their customers.  More than a third of SMEs here in the UK are writing off thousands of pounds worth of bad debts on an annual basis which means their businesses are not as profitable as they should be.  With the UK economy so heavily dependent upon small to medium businesses, this can have a knock-on effect on the economy in general. 

If you’re a small to medium business owner struggling with how to address the problem of customers or clients not paying, we have some tips for you that will, hopefully, make the process easier and less fraught.

Avoiding the problem in the first place is always preferable to dealing with the consequences, so make sure all of your customers know your credit terms by printing them clearly on each invoice.

If most of your customers are regular or repeat customers, perhaps adding a reminder of these payment terms in the email that accompanies your next invoice would remind customers and decrease the number of late payers or non-payers. 

Regular or repeat customers are much more likely to be guilty of making late payments rather than not paying at all.  After all, if you’re a supplier they need to maintain a working relationship with you in order to guarantee regular supplies.  If they place a repeat order before settling their current invoice, it’s worth emailing them to let them know that their order is ready and will be dispatched as soon as the outstanding invoice has been settled.

As soon as a bill is overdue, get in touch with your customer and politely ask for payment.  If you don’t receive a payment or reply within 7 days, check that the details of your invoice are correct and that you have quoted all the information necessary for the customer to identify the invoice (for example your invoice number and, if relevant, the customer’s own reference number). 

If you don’t receive a response within 7 days of the follow up email, try using the telephone to speak directly to the customer and find out if there is a problem with settling the invoice.  Don’t just assumed that the customer does not have the money, they may have a query on the account or some other type of problem.  This gives you the opportunity to address any issues they have with the invoice.  Try to work with the customer to solve the problem so that similar circumstances don’t arise in the future.

On the odd occasion, you will have a customer who transgresses the payment terms every single time.  Take a close look at the annual spend of such a customer and compare this with how much time you and your business devotes to securing their payment.  If the customer’s annual spend is small, you could consider no longer supplying this customer as it’s not cost efficient for your business.  However, if the customer’s annual spend is high and your business depends on this, then you may just have to live with it if you can’t encourage them into a regular payment schedule.  It really does depend on how much your customer spends and how much you need their business.