Late-paying customers. No business wants to deal with this issue. However, it is something that every company – at some stage – will face. The problem is that customers who delay paying can cause you a lot of financial problems. To try and minimise the damage, this guide details how to effectively handle late-paying customers.
Alleviate cash flow issues
When customers delay payment, this can have serious ramifications on your cash flow. A lack of money coming in means you will struggle to cover your bills. Due to this, it’s wise to have a funding alternative available should you encounter late-paying customers.
That alternative can be found in the form of invoice financing. Invoice finance is where you receive money from a lender against your unpaid invoices. However, before you start hunting down different factoring companies, first head to a specialist broker like fundinvoice.co.uk. By working with a specialist broker, they first take your information and current situation. They then use this information to introduce you to the best lenders for your needs, allowing you to use your unpaid invoices to secure funding within 24 hours.
Take a proactive approach
A proactive approach can assist in limiting the number of late-paying customers. This can be represented with fixed processes and policies, which are present in the terms and conditions that are signed by each client. This information will detail to them about what happens should they be late with payments, including the type of interest which could be added on top of their bill.
With clearly defined procedures for both you and your customers, this helps in the long run. For example, say you end up in the worst-case scenario, which is court action, you are better covered and more likely to receive a positive result.
Send out automatic reminders
Thanks to the power of online tools, it is possible to arrange for automatic reminders to be sent out to customers. After seven days, you could send out automatic emails to late-paying customers to remind them to make payments as soon as they can. It’s not just your customers that can be reminded, either. With online tools, you can set it so you receive notifications about when customer invoices are due.
Don’t delay getting in touch
When payment is overdue for a customer, don’t delay in contacting them about the situation. In fact, it should be done on the day it’s overdue. It is also recommended you contact them by phone rather than email. By doing so, you can be clear with your tone of voice – although you want to still keep it friendly. After all, they could have a valid reason for not covering their outstanding balance yet. You can then both agree to a new payment date.
What if a customer ignores your messages or agreements? This is the stage where you have to be persistent. A follow-up phone call, email reminders, text messages – make sure you don’t let up with your communication efforts. If you have received one too many excuses, make sure you are clear and firm with your discussions.