Late paying clients can be nuisance. Most businesses rely on a steady cash flow – if the money you’re owed isn’t coming in, it could be affecting your own ability to pay others on time. As a result, it’s important to tackle the problem of late paying clients before it gets you into financial trouble. Below are some of the ways in which you can put an end to late paying clients.
Be strict about chasing up
If you’re not chasing up clients, they’re more likely to keep on paying late. Getting into a habit of chasing up payments the moment they are late can show your clients that they can’t get away with it. This could involve setting up alerts to let you know when certain customers should have paid you so that you know when to start chasing up.
Chasing up payments isn’t fun but it is necessary. It’s important to not get angry with late paying customers and to not keep bombarding them with calls and emails – you don’t want to be sued for harassment. At the same time, you need to be consistent as you chase up. Knowing your legal rights could be essential – you can read up more here about legal rights when chasing up payments. Be prepared to negotiate with customers that owe you a lot of money. Getting back some money can be better than getting back no money.
Do client background checks
Before you take on a new client, consider always doing a background check to ensure that they can be trusted to make payments on time. This could be particularly important when taking on customers who may be paying large amounts on a regular basis.
A credit check is the most common type of background check. You could also research into bankruptcy records and look into other company information if you’re taking on a commercial client. Don’t always trust customers on face value. This is why banks often perform a revenue based loan to prevent situations where the customer cannot repay the loan.
Offer incentives to pay early/on time
Some customers may be more likely to pay on time if there are incentives in place spurring them to do so. Early repayment discounts could be one incentive to consider – this involves offering discounts to customers that pay early. You could also put into place late payment penalties. These could be outlined in an open banking contract and could involve charging late payment fees if a payment is not paid after a certain amount of time or withholding a service until a payment is made. Just be sure to know your rights and the customers rights when putting in place these late payment penalties (for instance, late payment fees can often only be charged after a certain period of time).
Send out automated reminders
Another way to encourage clients to pay on time is to send automated reminder emails before the payment due date. This could help to remind customers that a payment is due so that they can ensure that they have enough money in their account to make the payment. Some customers will deliberately avoid payments, but others may genuinely forget – reminder emails can be useful for this latter type of customer.
