Accounts Receivables Challenges: Dealing with Late Payments

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Most businesses operate by extending payment terms to customers. This certainly has its benefits (especially for the customer), and in an ideal world, you would get that check by the due date or even earlier. But, it usually plays out much differently in the real world. No business is immune from this issue, but if you are dealing with it on a regular basis, your cash flow suffers, which means your business suffers. Here are some tips deal with late invoices and get you paid faster.

Stop Feeling ‘’Rude’’

Most people have weird issues around money—talking about it makes us uncomfortable, and asking people for it makes us even more so. Approaching customers about late payments is probably one of the things a business owner dreads most. You may worry about alienating this business you have worked to build a relationship with. You do not want to appear ‘’rude’’ in requesting payment.  So, you keep letting that late invoice slide, hoping it will get paid without you having to initiate a potentially uncomfortable exchange.

But, you have to get over this way of thinking if you want to run a successful business. It is not rude to expect timely payment for the goods and serviced that were delivered as agreed upon. There was no misunderstanding that your customers would need to pay for these things. In this scenario, it is the customer who is being ‘’rude’’ by not paying you according to the terms that were agreed upon. You can still be friendly and amicable while requesting you get what is due to you. So, the next time you are putting off that customer contact because you worry that going after your money makes you look bad, remember this post and make that call.

Establish a Set Process for Dealing with Late Payments

I used to work for a collection agency, and one of the things I noticed most about the businesses I was meeting with was their haphazard collection efforts. There was absolutely no sort of process in place. That attempts to settle the bills were inconsistent was putting it mildly. Setting up a protocol for late invoices is an absolute must if you want to cut back on late payers and resolve past due invoices sooner than later. There is no one best way, but there has to be some way. Once that payment is one day late, make sure there is a phone call or email to ensure the bill was received properly. Then follow up with a phone call after a week if there is still no payment. Then send a letter. Whatever you think will work best with your customers. But, you must have a consistent process for handling late invoices that is applied each and every time.

Making Effective Collection Calls

If you are contacting customers about late payments over the phone, there are some strategies to net you better results. Avoid any distractions while talking—no fiddling with paperclips or checking emails. Sitting up straight will boost your confidence. End the call with a specific plan of action on the part of the customer, whether it is  to pay the invoice in full, a partial payment or the first payment in an agreed upon payment plan. Take detailed notes about the exchange so you have something to reference if you need to call back. Being prepared shows you mean business, and this can help move your bill to the top of the pile. You have to show customers that you are serious about settling the invoice.

If past due invoices are seriously affecting your cash flow, there are small business financing options, such as invoice factoring, that may help you temporarily. But, these services come with a fee and it is important to do your homework. You have to determine if the benefits outweigh the costs.

Kelli Cooper is a freelance writer who enjoys blogging about a variety of business topics.

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