How To Handle Late Paying Customers
Congratulations! You’ve had the balls to leave the 9-5 rat race and start up your own business. You’re now working on something you adore, something you’re actually passionate about and you no longer have a boss breathing down your neck each and every day. Result!
Running a business is an absolute rollercoaster but if you’re anything like me, you live for the excitement and freedom it brings.
There is just one big issue that a LOT of us have dealt with or WILL deal with at some point - LATE PAYING CUSTOMERS.
You’ve done the work. You’ve sent the invoice. The deadline for payment has passed and there is still nothing in the bank. The mortgage, council tax, gas and electric is also due in a couple of days. Wonderful.
Chasing late payments is one of the most uncomfortable and awkward tasks for many business owners, but if you’ve done the work you deserve to get paid.
According to The Credit Protection Association “UK small businesses have on average £31,055 in outstanding debts due to them and 71% of small business owners have had sleepless nights because they were worried about cash flow.”
So how do you handle these late payers?
Avoid it in the first place
The best way to avoid late payers is to set your business up so that it can’t happen in the first place. Ask for payment BEFORE creating/ delivering your product.
If you provide a service, many business owners ask for payment in advance for this too. If I get a client who wants £1k of work doing per month, there is no way I can risk doing all those hours and not getting paid for it, so I will have to at least partly charge in advance. Simple.
Set your terms early on
Again, if you are providing a service (like a VA, for example) make sure to send your new client an agreement to sign and send back, clearly setting out your payment terms before any work commences.
A well-written and clear agreement will help to back your case should you ever need to take legal action against your client.
Be persistent – but keep it professional
Don’t just let late payments slide. Send an email reminder. If they still don’t pay, send another one the week after. If they still haven’t paid, pick up the phone. Usually, this is enough to make them cough up.
However, if calling your client is too painful (I TOTALLY get it), you can hire a VA to do this. This can be a HUGE help.
1. A VA will probably have no emotional attachment to your business and should therefore, find it much easier to remain composed when dealing with this client.
2. Having someone else call your client on your company’s behalf can add more authority and credibility to your business (especially if you’re usually a one-man-band) and can help to scare clients into paying you quicker.
Just remember, keep all of your emails and telephone calls firm yet professional.
Depending on the size of the debt, if your customer still won’t pay after being contacted multiple times, it may be in your best interests to take legal action.
The Small Business Commissioner website has loads of information regarding this.
Chasing late payments will never be your favourite task as a business owner, but it comes with the territory and if you don’t want to become one of the 50k businesses that close each year due to late payments, be prepared to chase them.