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How to Ask for Customer's Late Payments (And Get Paid!)
September 05, 2018
Customer-Late-Payments

How to Ask for Customer's Late Payments (And Get Paid!)

As a small business owner, you rely on every cash inflow to keep your business afloat. Unfortunately, not all customers are diligent about paying their bills, so you might find yourself in the awkward situation of needing to chase down late payments from time-to-time. Although these conversations can be uncomfortable, it’s important to have a system in place to address these situations when they occur. In fact,  it’s crucial because nearly one-third of small businesses fail because due to low cash flow.

A well-defined process can help you establish expectations with your customers in order to collect your money, without offending or embarrassing them. Follow the strategies listed in this post so that you can recover payments faster the next time you’re dealing with a delinquent account.

5 Tips for Collecting Late Customer Payments:

1. Send a Reminder Email

The first and easiest step to take when you’re trying to collect a late payment is to send a reminder email. Everyone gets busy, and it’s very possible that your customer simply missed your invoice or forgot to send their payment. A polite and professional email may be all it takes to nudge them in the right direction.

Many businesses give their customers a grace period to pay their bills without penalty – often up to 30 days. However, sending an email during this period may help you and your customers avoid a more serious situation. Creating an email template in advance can standardize the process and reduce the stress of deciding what to write each time.

2. Make a Courtesy Phone Call

If sending an email doesn’t prompt the customer to submit their payment, you may need to follow up with a courtesy call. Whether you’re making the call yourself or asking your customer service department to do it, you should follow a script to ensure that your message is conveyed effectively.

Phone calls also give you with the opportunity to make a more personal connection with your customers. For instance, you can ask for feedback on the products or services you provided. Asking how you can improve in the future can allow you to build stronger customer relationships, which could ultimately enhance your business model.

3. Contact Another Department

If you’ve invoiced another business for goods or services and they’re late on their payment, you may need to contact someone else at the company. Typically, whoever is responsible for accounts payable can give you a better idea of when your invoice was received and its status. If the payment hasn’t been initiated already, politely asking what measures the company has in place to pay your overdue invoice immediately may resolve the issue.

4. Offer a Payment Plan

Sometimes, you may need to work with a customer to reach an equitable solution. If they’re experiencing cash flow issues, offering them the option to set up a payment plan may make it easier for them to pay their bills and for you to recover more of what they owe you. It may also help you build goodwill with the customer, leading them to give you more business in the future or refer you to others. Of course, payment plans aren’t ideal, so if a customer is consistently having problems paying their bills, it may be best to end the relationship.

5. Hire a Collection Agency

If all your efforts to recover your payment are unsuccessful, you can hire an agency to collect the debt for you. While this should typically be a last resort, spending excessive amounts of time and resources chasing delinquent accounts will distract you from day-to-day operations and growing your business.

A collection agency will contact the customer on your behalf, typically by phone and in writing. In extreme cases, they may even take legal action. Hiring an agency can be extremely valuable, especially if you’re trying to collect a significant sum of money. However, not all agencies are reputable, so it’s important to do your research and find one that is experienced, professional, and familiar with your industry.

Conclusion: There Are Ways to Collect Late Payments

Asking for money can be a painful process, even when it’s owed to you. While it’s important to set payment expectations with customers ahead of time, delinquent accounts are unavoidable for most small businesses. Having a system in place to recover overdue payments before you need it can ease the burden of collecting debts and make your business look more professional.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].
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