3 Tips for Collecting on Past Due Invoices
A sale really is not completed until that invoice is paid; it is great if a client made a 10,000 purchase from you, but until that money hits your bank account, it will not do you much good for your payroll or settling a bill with your own vendors. Tough times can turn even the best customers into financial thorns in your side; some may just do a poor job of managing their accounts payable. Regardless of the reason, late payments are something that needs to be nipped in the bud sooner rather than later. Here are some tips for getting on top of late-paying customers.
Make Sure Payment Terms are Clearly Established
If you have not set clear payment terms with customers, you are just asking for trouble. If they are juggling their bills and paying by priority, yours will be at the bottom of the pile; they are not going to be running to pay that bill and probably not give it a second thought until you reach out them asking for a check. You must be very specific in payment requirements—when invoices are due and what happens when they are late. If you have clearly established a procedure from the get-go, you will be coming from a much stronger place when you reach out to clients who are past due.
Hop on Late Payments Immediately
Broaching the subject of past due invoices makes many business owners uncomfortable—there is fear of souring relations with customers and losing their business; but, you provided a good or service and you deserve to get paid. While it is important to maintain a friendly rapport with customers, ultimately, it is a business relationship. You must get on top of late payments immediately. You do not have to be accusatory or unfriendly about it, but you must act quickly. If the due date has passed with no payment, you should get in touch the next day; phone calls are better than emails. Call to make sure the invoice was received and to see if there were any problems with the goods or services. It is possible that the person was away or simply forgot and payment will be taken care of immediately. If it was intentional because of money issues, they will see you are serious about timely payments and yours will become a priority. Regardless of the reason, it is important to end the phone call with an established date for receiving the payment, not any vague declarations. Keeping a steady flow of small business capital is crucial.
Have a Clearly Defined Process
I used work in the sales department of a collections agency who offered flat fee collection services; the company’s collections methods often came up during appointments, and one consistent theme I noticed was a complete lack of consistency in collecting past due invoices. It was a very haphazard process and naturally, the business experienced spotty results. Late invoices are part of the game when extending credit to customers, and as such, you need to establish a set process as to how to deal with the problem. Establish methods of contact, how often these contact will take place, what will be said with each contact, options given to the customer to settle the payment, and at what point you will turn to outside help, such as an attorney or collection agency.
Kelli Cooper is a freelance writer who blogs about all things business.