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5 Ways to Effectively Deal with Late Payments

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5 Ways to Effectively Deal with Late Payments

One would expect that the modern business world is no longer infused with petty excuses and stubbornness, and yet, even the most acclaimed of professionals get stuck in a vicious cycle with clients that refuse to pay. Sometimes, they don’t refuse, they claim they don’t have the funds, for the time being, others blame a system error, and others truly do need to manage an internal crisis. No matter what the situation is, your own business shouldn’t suffer the consequences.

If you have completed your work within the set timeframe, and your clients are satisfied with the results, and you’ve completed all the steps one needs to complete to send a valid invoice, then it’s up to them to hold up their end of the bargain. To make sure, or at least do your best to ensure this happens, you can use the following strategies to your advantage.

Offer discounts for early payments – and charge interest for late ones

One of the best ways to set expectations very clear from the beginning of your collaboration is to show that you value your own work, but that you also respect their effort. There are various ways to send this very simple message in more than merely a verbal way. In fact, your contract should reflect this attitude, with the help of incentives and penalties. Some clients, especially those with no cash-flow issues, will always pay on time – and you can thank them by giving them a discount, which will only inspire them to keep up such an attitude.

On the other hand, if there are those that have a tendency to be late no matter the excuse, you can let them know that there will be a penalty fee every time they fail to cover the costs of your services within the designated deadline. It’s only fair, after all. However, this can be a tricky system to implement, as it may discourage some clients from signing a contract with you – if you can afford to filter them out, that’s fine, but if you cannot, perhaps you may want to look for a different solution.

Automate the entire invoicing system

Thanks to speedy modernization of the accounting processes, your business can easily opt for one of many ways to streamline your finances. Simply put, if your clients are struggling to make their payments on time, you can discuss the option of introducing a direct debit system to automate their bank debits or credit card payments in a secure environment. This is particularly handy for recurring clients with contracts that span across several months, as it saves time and trouble for both parties involved.

Certain systems also utilize automatic failed payment handling processes to save you the unpleasantness of sending out those template email reminders or picking up the phone for yet another awkward call with your client’s accounting department. Automation can help you keep the process clean, simple, and straightforward so that you can focus on actually doing the work instead of chasing down late payments.

Set your terms of the contract from the get-go

How you build the foundation of your collaboration will shape your relationship down the road. If you are too lenient with your expectations, and you give your clients too much freedom in moving deadlines, they will likely try to do the same with your payment schedule. That is no way to run a business since you likely also have to keep up with your cash flow needs and send your own vendors payments every month.

If you have specific deadlines to follow through with your own suppliers, you need to devise a payment schedule in your contract that will allow you the time and money to fulfill those obligations towards them. If that means that the traditional 90-day invoice payment deadline will not work in your favor, then so be it, and set those deadlines clearly in your contract from day one.

Utilize email to send reminders

Sometimes the simplest of methods can do the trick, especially if the reason for their late payment is in no way malicious, such as, your invoice simply slipped through the cracks, or someone on their team made a mistake in the process. These issues can be averted or at least handled with proper poise if you have a set of reliable notifications to send out every time you notice a delay.

Since every client is different, and you’ll have a different manner to approach each one of them, you can make changes every time you do need to send out those emails – but having core patterns prepared will save you hours in contemplating over which phrase sounds least aggressive and which one won’t risk your entire relationship going down the drain.

Keep your cool

Finally, and unfortunately, there will always be clients who cannot pay on time simply because they run out of money, or they end up being unprofessional. The world of business is a cruel and unfair one at times, but that is no reason to throw in the towel. However, that is also no reason to lose your mind over such problems or resort to a lengthy telephone or email rant during which you give your relentless client a piece of your very annoyed mind.

Instead, remain professional. This may be the hardest lesson to learn in business, but keeping your cool will help you stay in business, recognize potential late-payers down the road, and it will ultimately protect your reputation.

 

No matter if you’ve been running your business for a while or you’re new in the game, you will always need to stay patient and persistent with these sensitive matters. Use these tactics to minimize the risk of late payments, but also stay civil and keep it classy no matter how tough it may get!

 

Barjunaid Cadir is a Content Writer in The Weekly Trends, Web Developer, SEO Content Manager, LinkedIn Specialist, Social Media Manager, and a University Researcher at Anadolu University in Eskisehir, Turkey.

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