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Late payment has always been a problem for small businesses, and things have gotten worse since economic conditions...
Late payment has always been a problem for small businesses, and things have gotten worse since economic conditions became challenging.
If you run your own business, it’s a sad reality that sooner or later you will find yourself having to chase one or more clients for overdue money. It’s not a fun thing to do and it often seems like an unfair drain on your time, but if you’re not consistent in your credit control, companies may see you as a soft touch and leave you waiting even longer.
Here are six effective ways to ask a client for overdue money:
A red reminder invoice is sometimes all that’s required to secure payment. In fact, though few companies would publicly admit it, plenty have a policy of waiting until the reminder arrives before paying any invoices.
With this in mind, it’s imperative that you’re consistent in issuing reminders for overdue invoices. If your payment terms are 30-days, a reminder should go out on “day 31” every time. This will show clients that you are no pushover and that you take credit control seriously.
You may not be especially comfortable with it, but chasing payment by phone is often far more effective that doing so by post or email.
Essentially, clients know that if you’re willing to phone once, you will be willing to phone again, and nobody likes the embarrassment of being constantly hassled for money – so in plenty of cases your first phone call will result in a quick payment.
If your chasing attempts are getting you nowhere, perhaps you’re not chasing the right person? If a company’s finance department seems as if it is ignoring you, it may prove worthwhile speaking to a director or another point of contact so that they push things along.
In the long term, try to identify who, in each company, is responsible for signing off and paying your invoices and do your best to build a relationship with them. If you’re friendly with the people involved, they will want to see you paid promptly.
Most accountancy software has the inbuilt ability to send statements, complete with a summary of invoices that are due and overdue. Sending these as a matter of course acts as another reminder that an invoice is due for payment.
This is a rather drastic step, but if you become genuinely concerned that a client is not going to pay, it’s risky to continue doing work for them as you may end up investing even more time for no reward.
Think carefully before taking this step, as it will undoubtedly change the dynamic of your client relationship, but if you feel you have to, make it clear that you will stop providing your services until outstanding amounts are paid. If nothing else, this will open lines of communication about the outstanding amount.
“Taking the legal route” doesn’t mean involving a solicitor, but when all other attempts to obtain your money have failed, you may need to start sending letters in legal language that formally state what sums are outstanding and what action you will take if they remain unpaid.
The legal position on this varies from country to country. In the UK, for example, you are legally allowed to charge interest on overdue sums. Sending the first letter stating you intend to do this is often all it takes to extract money from the most stubborn of non-payers. Obviously you will need to check the rules in your country, but you should be able to find suitable template letters online.