How to chase late payments.
August 22, 2018
Late payment of invoices can cause cashflow problems and create a real headache for your business. Usually late payment is caused by a genuine oversight on the part of your customer and a quick phone call or email will jog their memory and sort out the situation. Here are a few tips to help when you have to chase a late payment.
- Be clear that you charge interest on late payments
Your terms should be stated on your invoice and established early with your client so you both know where you stand. You can set your terms how you want them but take care not to be too aggressive about it as this can scare off the customer. The Government guideline is 8% plus the Bank of England base rate for business transactions. Some people stick with this while others charge 3% after 60 days or 2% after 30 days. You could even flip this and offer a discount for prompt payment.
- Begin with an email
It’s a good idea to have an email prepared in advance of needing to send it. You’ll find it easier if you have thought it through and are prepared for possible scenarios. Start with a friendly reminder… eg
This is just a reminder that Invoice 19 is now due for payment. I’d really appreciate it if you could arrange payment as soon as possible.
If two or three emails like this don’t do the trick then you need to become a bit more insistent… eg
The payment for invoice 19 has still not been received. I attach another copy of the invoice with my payment details.
Just to remind you that if payment is not received within 30 days, I reserve the right to add late payment charges as detailed in my terms.
- Follow up with a phone call
If, after few emails, payment is still not forthcoming, speaking to the customer will often have the desired effect. Again, it is good to prepare a script so that you’re ready with what you want to say. It’s important to be confident, polite and professional and having a script will help you achieve this.
Ask to speak to the person in charge of paying invoices. Remember they are human so be respectful. Say that you are enquiring about the payment status for the invoice and be prepared to resend it if needed. Find out who to send it to and attach a read receipt to make it easier to track the progress of the email.
Offer to give the person you are speaking to time to look into the payment and get their name and contact details so you can speak to them again when you ring back. Make it clear that you will continue to call back until the payment issue is sorted out.
The thought of making multiple phone calls may fill you with dread, so you could get a virtual assistant to do it for you. Sometimes having someone else speak to the customer adds authority and resolves the issue more quickly.
- Be persistent
Usually a gentle reminder will solve the late payment problem so don’t assume you will need to get tough immediately. Give the customer the benefit of the doubt – we all forget things when we’re busy. If you’re persistent and proactive you should find that late payments don’t happen too often.