What can you do about late payments?

To start the recovery process, try and find out from the client whether they have the invoice that you are asking about.

Did they receive it in the mail? Is the amount right? Are the details correct?

This is the first step for the recovery of your money.

Sending them a polite reminder on an email explaining that the payment is past due excellent, and you could also ask them to ensure that they received the invoice and that they had no problems with it.

Once the invoice has been confirmed, it’s time to get to business of recovery. First, you must ask them to pay the invoice.

Of course, this should be done politely and professionally, as you do not want to cause any problems with the client.

Send them an email that clearly outlines the due date and its length since the invoice was due. Remind them that the late fees will be included in the payment as per the terms and conditions of the contract.

Let them know the different ways they should send payment, and again, attach the original invoice to the email.

When the email goes unanswered, it’s time to try another tactic. Call them. Speaking with the client directly makes it easy for you to hear their reasons for not paying and enables you to try and come to an agreement.

When you call, ensure to identify yourself, calmly explain why you are calling, and then follow up on the payment. If possible, you could secure the payment on the phone with a credit card payment or a direct bank transfer.

If this does not work, then get them to commit to a date when they would pay and the method they will use to pay.

Always remain friendly and professional, and do not let your emotions get the best of you. Be nice and thank them when the call is over.

Now, it’s time to be firm. Let the client know that you are stopping any current ongoing contracts with them, and you should let them know that you may not be willing to take on any more clients until the current overdue invoice is paid.

If they do not meet the payment promise they made over the phone, and you have been chasing this payment for a while now, you must be willing to cut ties with them.

This will probably motivate them to pay quickly if they rely on you for current and future projects. Cutting them off will also protect you from all future losses if you can no longer trust this client.

But, be sure to be courteous and firm with them when you let them know that you will be refusing any future work from them.

KYC may sound like a cliché, but it helps to establish a good relationship with your client.

It is much easier to sort out the payment terms and chase the overdue payments when you know what kind of client you are dealing with.

Do not let the frustrations of the late payment sour this relationship. However, small business owners run the risk of offending their clients by being too tough on them about payments.

Do not just go into a business agreement blindly. Instead, do proper research of the business you are about to engage with.

Find out their typical timescales for settling invoices and whether or not they do pay the invoices.

The most extended payment period for Invoices in the Business to Business Sector for the UK is usually 27 days. Find out whether this is agreeable with them.

Ensure you understand their business in detail and the kind of challenges they face. For example, are they profitable, how have they been interacting with other businesses? How many credit facilities have they taken?

All of these are essential questions to be answered when getting into a B2B business, as it will give you an idea of how long it usually takes them to pay an invoice, which you can include in the contract you will prepare for them.

When you agree on payment terms in advance, you are in a better position to protect yourself from late payments and non-payments.

One thing to be aware of is that the blue-chip companies tend to insist on long-term payments of almost 90 days.

When you enter into a contract with such as company, you must either request payment upfront or be willing to wait for that duration for the payment to be made.

For small businesses, this is a long time to wait for cash, and therefore, they must decide whether or not the business is worth it.

Additionally, the large companies will want to receive discounts for paying early, and this should be considered early on and incorporated into the contract.

Not only should you ensure that you send the invoice on time or immediately after the delivery of the services or goods, but you must also ensure that the invoice is correctly written and prepared.

The faster you send the invoice, the faster the company will start preparing the payment. Most companies perform their invoicing in batches, and it may take as long as a week or longer to pay their clients.

Errors on your invoice can also become a big issue, whereby the company may refuse to pay the invoice.

Ensure that the quoted prices match up to all the other data in the system. There must be no inconsistencies that are likely to expose your company and derail your payment.

To mitigate against this, have a quality control system that ensures that more than two people go through the invoices before sending them to the customer.

Remind Clients to pay the invoice immediately it’s due

When dealing with and preparing invoices, the best thing to do is to ensure that you prepare and deliver them to the client immediately after the service or goods has been delivered.

Heavy-handed attempts to collect from the client will sometimes backfire and sever the relationship with the client.

This is, in fact, pretty delicate when small companies are trying to negotiate with small ones. The small firm will be uncomfortable applying too much pressure to the big company, and at the same time, trying to salvage the relationship.