In the age of faster bank payments, when funds can be in the recipient’s account almost instantaneously, the very fact a client tells you your cheque is in the post should ring warning bells.
Late payments are the bane of the small business owner’s life. Most of you will have heard all of the excuses, from the plausible to the downright bizarre, but no matter how entertaining the excuses may be, late payments put your cashflow and business at risk.
These are the customers who really do claim the cheque is in the post or the finance girl is off until next week or they are waiting for new bank log in credentials…….
Whilst these are all plausible excuses for late payments, and why the money owed to you is not in your account, they often indicate a client who is buying some more time.
The infuriating thing, is that if they were honest, you could probably accommodate longer terms because you’d be able to adjust your cashflow forecast and plan for the deficit. Sometimes what you need to do is open the door to make an honest conversation possible.
If you think someone is stalling, offer them an alternate payment option, perhaps Paypal or Stripe if you don’t process card payments yourself. It’s very easy to use these services, there is a modest processing fee but it’s well worth it to weed out the ‘stallers’ from the the genuine excuses.
Don’t be afraid to be the one to start the conversation about the late payment. Don’t just send reminders, ask them when you can expect payment. This will often be all that’s needed to get an honest answer.
You may have clients who, after the work has been done or the goods have been delivered, decide they no longer want them, can’t afford them, try to claim a fault on your part…….all to avoid payment.
It’s very tempting to work for that very friendly new client on the basis of a handshake, but that gives you nothing to refer back to when that client then quite literally tries to re-write history or renegotiate terms after the event.
Always put your agreements in writing and include a clause abut scope creep, cancellation or any other potential alteration to your arrangement.
Also, leave yourself with leverage. Make it clear that goods remain your property until they are paid for in full. Don’t hand over the final version of anything until you have been paid and be clear about what you’ll deliver if the client fails to provide what you need. For instance, I cannot submit a client’s tax return in a timely manner if the client does not deliver their paperwork to me by an agreed date. Without the information, the tax return cannot be completed and the client is fined for late or non submission. That’s not my fault. We agreed what was needed and when it was needed by. The responsibility has to rest with the client.
You must have something in writing that will back you up when the worst happens.
The Disorganised or Hare-Brained Client
These are the ones, and we’ll give them the benefit of the doubt, that can never find your invoice, even after the third copy has been sent.
You have better things to do than keep printing off invoices, sticking on stamps and trotting off to the post box.
Find a way to generate or store your invoices as pdf files that you can email really quickly, easily and cheaply to these disorganised clients.
You could also try sending them a Paypal Request for Payment so they can just settle up on a card.
Don’t let your client’s disorganisation become your problem. Have a contingency plan in place to deal with these clients so they aren’t constantly pushing the problem back into your inbox or in-tray.
Sadly these do exist.
Whether they never have any intention of paying you or whether something dire really does happen is anyone’s guess, but the net result is that, come payment time, they disappear off the face of the earth.
All of the above applies to these late payers but there’s going to come a time when you will have to decide whether to make a claim through the courts or write it off to experience.
As much as you won’t want to, you must always have this eventuality in mind as a possibility at the outset of any business relationship.
It’s not written in stone anywhere that you must offer 30, 60 or 90 days credit to anyone. Why should you effectively finance someone else’s business?
Be clear at the outset about your payment terms – and enforce them. Take deposit and stage payments and enshrine these in your contract or agreement. At least, that way, if the client does a vanishing act at the end of the project you are not 100% out of pocket.
Helping You Avoid Late Payments
We know how important cashflow is to our clients and how awkward they often feel chasing money that’s due to them so we become their credit controllers.
We maintain their sales ledgers, issuing invoices and following up in accordance with the agreed payment terms.
Using us as an intermediary stops the awkwardness, makes our clients seem very professional (and not to be messed with!) and leaves them with more time to do what they do best.
If late payments are putting your business at risk talk to us about how we can help.