How To Deal With Slow Paying Clients
Every business has at least one or two (maybe more) slow paying clients on it's books. As most small businesses don't have a huge pile of money lying around, unpaid bills can become a bit of a nightmare. There's a very true saying in business that goes along the lines of 'cash flow is king'. It's for this reason that we've put together these tips and tricks to help in giving those pesky debtors a gentle nudge into paying your invoice.
This point comes first as it can't be stressed enough. Most customers pay late. In fact, on average the majority will go more than two weeks over the terms stated on your invoice. With this in mind, try and take two weeks off of your terms to make up the difference. For example, instead of the standard 30 days, which as we know would normally get paid in about 45 days, give your clients 15 days with the expectaction that they will take 30.
Tip: At the foot of your invoices write "As a small business, we always appreciate speedy payment". Honesty wins favour with clients.
Your customers won't like it if you only allow them to pay in cash. So, by giving customers the option to pay your invoice via multiple methods, such as cheques, over the phone and online payment services like PayPal, you make it more convenient to pay. This also allows customers who are short on funds to pay using their credit cards. Statistically, the more payment options you can give a client, the faster they will pay.
Send A Reminder
Any customer is more than a week past due should be sent a gentle reminder that your invoice is still outstanding. Put your clients shoes on for a moment, desk spilling over with paperwork, hundreds of emails coming in. It's easy to miss something. Therefore, a quick and friendly reminder phone call isn't going to upset them, but it'll help get you paid.
Most large organisations require whats kown as a purchase order request from the person who is placing that order with your company, before the accounts department will pay the invoice. When you receive an order from a new customer, ask whether the company requires a PO. If so, the person placing the order should provide you with a PO number that's specific to the works you'll undertake. Include this number on the invoice you send. This will ensure that accounts department can match your invoice with the corresponding purchase order and authorise your payment in a speedy fashion.
Never underestimate the power of a professional relationship with your clientele. Get to know them, develop a true understanding of their business and find out who's in charge of paying the bills. If you can’t meet your customers in person, meet them over the phone. Communicate. Learn their names and don’t forget these people during the holidays when you are sending thank you cards. People who know you as a person will do their best to make sure your company gets paid. This is especially true if they know you to be a nice person.
Tip: Don't set aside a day each month to send invoices. Instead, send them as soon as works are completed. This means it's fresh in your clients mind and is proven to speed up payments.
Play Hard Ball
When you've done several jobs for a client, sent several invoices to that client, and still not received any recompence. It's time to play hard ball and put a halt to all works until payment is made. At this point, communication is key. It may be that the accounting department has genuinely missed your invoices, but don't wait for them because you'll probably be waiting a while. Instead, give them a call! Most people will apologise for the delay and pay there and then.
Offer A Discount
Offering clients a discount is something that should only be done if the business is really struggling with late debtors, and after all other options have been exhausted. Upon any given invoice a discount of 1 or 2% can be offered to grab the attention of your customer, but the discount will only be granted if the payment is made before the due date. This will help to shift the power into your hands and force a slow paying account to get a move on. However, whilst your business may get the money in sooner, it will be slightly less.
Again, late fees are something of a last resort and should be no means be implemented with clients who are only a couple of days overdue. As most business owners know, some customers just dont want to pay, but what if paying late came at a cost. Adding interest, even an amount as small as 1.5% should be enough to make them get that cheque in the mail. Late fees can annoy clients, so only use this tactic if really needed.
Tip: Although tempting, never loose your temper with clients over late payments. You don't want your business to get a reputation!