Don’t Let Slow-Paying Customers Stall Your Business Growth

How can you get paid on time without ruining your relationships with clients? Now is the time to figure it out.

The Negative Impact of Late Payments

They don’t immediately ruin your progress, but they erode your business quietly but steadily. Ensuring your services receive the well-deserved credit on time isn’t about installing fancy software or choosing aggressive communication strategies. With the right approach, you can achieve better results and minimize the risk of late payments and linked issues:

enhanced stress;
disrupted workflows;
challenging cash operations and audits;
stalled projects;
delayed payrolls, etc.

Consistent and well-structured policies for late payments can do a magic trick.

The Key Lessons to Be Learned

Here are the main takeaways to bear in mind:

Your communication strategies should be within the boundaries of respect and mutual understanding, without overlooking consistent and steady pressure on the clients who refuse to pay on time.
Work on a formal process to solve such cases and address any invoicing problems and disputes with your clientele.
Set clear payment terms and steps you will take if something goes wrong.

Should You Sue Over Unpaid Invoices?

A lot depends on the target case. While litigation may require more funds than the debt itself, this course of action may be required for larger projects and operations. Consult with your financial advisor to choose the best strategy.

Guidelines for Business Owners on How to Cope with Late Payments

Let’s check how you can incorporate these policies in practice. Onwards!

Step 1: Assign Collections to the Right People

The rule of thumb is to separate your collections and customer relationships. Don’t create unnecessary friction by assigning the wrong personnel, i.e., salespeople or account managers, to do the job.

Instead, it’s better to ensure a well-trained expert handles all payment communications of your business, be it an accountant or a bookkeeper. While some tasks may be interchangeably performed within your company’s departments, that’s not the case.

Step 2: Clearly Define Payment Terms

If your policies are vague, they increase the risk of late payments. Use clear and simple instructions with proper detailing to highlight the best terms for your audience to pay for your products and services. These conditions should be vividly highlighted in POs, quotes, contracts, and invoices. The same goes for the aftermath when customers fail to meet the agreement’s terms. For instance, you can withhold the contract’s deliverables and add so-called late fees (calculated as a percentage of the total amount or a fixed sum of money).

Step 3: Document Your Invoicing Process

A consistent system is what leads to a well-structured and confidence-based performance, both externally and internally. Formalize your tactics to streamline your invoicing:

assigning the responsible parties;
defining an invoice day and pre-invoice deadlines;
optimizing multi-channel delivery with online and physical means;
collecting reports and reviewing them with your company’s finance team to stay responsible and proactive.

Step 4: Build an Escalation Strategy

Create a scenario that your company’s representatives will stick to when dealing with customers who stall payments.

From one to fifteen days past due — a friendly email reminder will be a sufficient course of action.
Up to a month late — switch to weekly email reminders, keeping the target updated on their account statement. Try to reach out to the client via phone to check in (by Day 28).
Up to ninety days delinquent — opt for weekly phone calls and twice-weekly emails with clear statements about your actions if the case isn’t solved shortly.
Up to one hundred and twenty days — put the target client’s account on hold and stick to your brand’s plan in addressing late payments, be it pausing ongoing operations or charging late fees.
More than four months — during the final stage, notify the client about the legal action that will be taken next.

Wrapping It Up

Be consistent and stick to the original plan, holding your customers accountable for their actions. Well-thought-out invoicing and escalation processes are a must for any brand. Your message is clear and loud — you value mutually beneficial relationships that stick to the rules of the game.