Waiting for late payments from customers can be both frustrating and damaging for your business.
Without the arrival of forecasted income, your working capital can suffer, making monthly and annual targets out of reach and potentially leaving you short of the cash you need to pay your bills.
While clients can be difficult to predict, there are a few steps you can take to better handle late payments and keep your business running as smoothly as possible:
Maintain a good rapport with your customers
From the moment you agree terms with a new customer, it is important to maintain a relationship with them. Staying in regular communication means you can make sure they know when payment is due, and they can easily contact you if they have any problems. If something does go wrong, it will be much easier to have an effective discussion with a customer you know, rather than someone you have not spoken with since the deal was agreed.
Follow up any late payments swiftly
Although one consistent late payer may not feel like a big problem, over a longer period of time it could have a significant impact on your available cash. Keep track of repeat offenders and get in touch with them when the payment deadline is close. Make sure they know exactly what they owe, and are aware of any late payment fees.
Be firm but flexible
Important though it is to follow up late payers, in some instances, your customer may be temporarily unable to pay. If a business is struggling with a short-term deficit, there will likely be little to gain from threatening them with late fees, and it could ultimately make things worse for both of you. Instead consider an extension, or that they make the payment in smaller instalments.
Be ready for anything
Ask most experienced business owners and they will be able to tell you a story about a client who traded with them once, then disappeared. If the invoice deadline has passed and you cannot get through to the customer, it is important to consider the best course of action. One option is to hire a collection agency, which can chase up the payment on your behalf. Another would be to file a claim through the small claims court. Both options, however, are expensive, and by no means guarantee that you will receive the payment. As painful as it seems, the best option, might be to cut your losses and make a note to be more careful in future, carrying out thorough credit checks on all potential clients. (At Jardine Norton, we have a unique solution for dealing with this particular problem – get in touch to find out more)
Follow up any late payments swiftly
Although one consistent late payer may not feel like a big problem, over a longer period of time it could have a significant impact on your available cash. It’s also not unheard of for clients talk to each other, and if word gets around that your company is slow to follow up on overdue invoices, one could quickly turn into a few more.
Keep track of repeat offenders
Create a list of customers who repeatedly pay late and give them a call when the payment deadline is close. Make sure they know exactly what they owe, how to transfer the money to you, and are aware of any late payment fees.
Give yourself some breathing space with Business Invoice Finance
Slow and unreliable clients can be a difficult problem to eliminate entirely, but by using one of the many types of trade finance available such as single invoice finance, you can dramatically reduce the impact they have on your profits and working capital. An overdraft or loan from the bank is another way to ensure steady cash flow while you wait for delayed payments to arrive.
At Jardine Norton our quick, easy approach to trade finance takes all the uncertainty out of customer payments, giving you up to 80% of the value of your invoices instantly. We provide small business invoice factoring so regardless of when your payments arrive, you’ll get paid for the work you do straight away so you can get on with running your business.