Reduce Late Payments in your Business

Do you need to reduce late payments in your business?  Is your business consistently, or even occasionally, receiving late payments from debtors?

You may consider this a simple annoyance with difficult clients, but in reality, it can be much more than this.

You see, consistent late payments can result in poor cash flow, and poor cash flow can be really damaging to your business.

So, how do I eradicate, or at least decrease, the issue of late payment within my business?

In this article our professional debt collection agents will lay out some tips on how your business can take action to decrease the number of late payers within your clientele.

How Can I Reduce Late Payments?

There are a number of things you can do to reduce late payments in your business, including:

  1. Active Communication
  2. Send Clear and Timely Invoices
  3. Being Open to Negotiation
  4. Select Customers Carefully
  5. Reward Early Payers
  6. Stay Polite and Send Friendly Reminders
  7. Take Legal Action When Necessary

We will explain in more detail below.

Reduce Late Payments with Active Communication

Active communication is vital to ensuring your debts are collected promptly.

When speaking with debtors on a regular basis, you open up the opportunity to be informed about other matters in their lives, possibly matters that may prevent them from being able to continue paying their debts within the timeline discussed in your contract.

Furthermore, communication is important to ensure debtors are maintaining on top of their debts and remain aware of the details of their contract to you.

If you notice a debtor is late with a payment, be sure to send them a friendly reminder at the nearest possible convenience to make them aware that you know about the missed payment and are willing to follow up on it.

Remember to keep the communication within the Debt collection guidelines: for collectors and creditors, however, as you may find yourself in legal strife if you do not!

Send Clear and Timely Invoices

It is also important to receive on-time payments to spend the time and effort making sure your business invoices are both clear and sent on time.

This can benefit your cash flow and the timeliness of invoices in a number of ways. A clear invoice with the details regarding payments and requirements, including the reasoning for such (if you wish), can help to ensure clients are knowledgeable about the requirements of their position and why it is so.

Furthermore, it can help to avoid those bothersome, time-consuming follow-up questions about details or why the conditions of your invoices are as they are.

Clients may also feel like they are being treated with high regard and may continue coming back to your company and recommending it to others.

Also, ensure your invoices are correct and consistent to assist customers with comparing past invoices and prioritising your payments.

Reduce Late Payments with Negotiation

Keeping yourself and your business open to negotiation is a great way to ensure customers are paying their debts on time!

Negotiation is a difficult topic and may seem slightly backwards to allow changes to be made to the contract after already been signed.

However, it can be of great assistance to your business in ensuring clients are paying on time and in the proper amounts. As we know, situations in life occur that can cause great stress in the life of a customer, including stress in the financial field.

Customers may find themselves unable to pay their debts to you at a specific time due to personal matters.

Opening yourself to negotiation benefits all parties by allowing the debtor to adapt their payment plan to suit their circumstance while also allowing your business to be up to date on said matters and establish a clear payment plan that can be factored into company finances.  

It also builds a level of trust between yourself and your debtor, meaning that they may actively come to you with issues regarding their debts without prompt.

Reduce Late Payments by Selecting Customers Carefully

When new customers are looking to work with your business, it is advisable to choose customers a little more carefully than you may think.

It may seem like it will lose your business money by turning down or avoiding a certain clientele, but it may actually save a noticeable portion of funds and efforts.

When speaking with potential customers, you may want to look out for some particular behaviours. Are they disrespectful? Do they seem to undervalue your business or your work?

If you observe these behaviours, you may want to politely steer clear of their business!

Customers like this will generally put off payments or simply not care enough to pay until absolutely necessary, or in other terms after you’ve put significant money and time into the pursuit of payments.

Furthermore, and more importantly, if it is an option for your business you may want to search the customer’s credit score and report to look for any financial red flags.

If the customer has a low credit score, has a history of insolvency, or has recently been bankrupt, you may want to also decline their business in avoidance of missed payments or them declaring bankruptcy/insolvency.

Reduce Late Payments by Rewarding Early Payers

You may also want to set up a reward system for debtors that pay off debts early.

This can act as an incentive for clients to, well, pay early, overall improving the cash flow of your business and decreasing the number of late payers.

While a customer owing you funds is a legal bind, it doesn’t really do much to assist your business for the time being, so it is a great idea for both decreasing late payments and just generally improving your company’s cash flow to actively pursue early payment.

You can do this in a number of ways. Just for some background, there are generally 3 types of invoice terms, due on the 30th, 60th, or 90th day.

Most clients will simply wait for the stated date on the invoice to complete the payment, however, with a little incentive, they may pay a little early.

An incentive for early payment may be discounts on future purchases or a deal of another sort.

Stay Polite and Send Friendly Reminders

Late payers, especially when it's consistent, can be a real bother.

Constantly sending reminders, following up on payments, and even considering taking legal action can be stressful and drain a portion of your customer's funds and efforts.

However, as difficult as it may seem, it is important you stay polite and consistent with reminders and communication.

This is important for several reasons, and not following this suggestion can result in some negative impacts.

Being pleasant with a difficult customer may seem unimportant but appearing aggressive or impatient may cause your business negative recommendations and lost business.

In more extreme situations, the constant attempt to contact customers may land you in a lawsuit as it can be considered by the court harassment, as stated in the Debt collection guidelines: for collectors and creditors.

Take Legal Action When Necessary

So, you’ve tried everything.

You’ve consistently contacted your clients, sent reminders and letters stating the payment is late and received no response or payment.

Practically, you’ve done everything within your power to receive the payment.

It may be time to take action within the courts. It is important to gather sufficient evidence that you are both owed a debt and went through adequate lengths to pursue the payment pre-court. 

Our special relationship with debt recovery lawyers means that if we cannot collect, then we can refer you to professionals.

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