Late-paying customers can be a real nuisance for many business owners and freelancers. It could be having a knock-on effect on your own ability to pay bills. This then creates a vicious cycle of being owed money while also owing money to others.
To help restore a healthy cash flow, here are just some of the steps that you can take to get customers paying up.
Chase them up
Chasing up late-paying customers can be awkward, but it has to be done. Make sure that you’re keeping a record of dates when you should be paid. If you aren’t paid on these dates, send a friendly reminder via email immediately after. If after several days you still haven’t been paid, ring them up. It’s possible that they may have a sincere reason for not paying such as unprecedented financial troubles, in which case you should try to negotiate a more affordable payment system (such as paying in instalments). Continue to chase them up after if they still don’t pay up. Avoid bombarding them with constant calls and emails several times per day – as desperate as you may be to get paid, this could be viewed as harassment.
Know your legal rights
If after several attempts to get customers to pay up you still haven’t received anything, it could be worth considering legal action. With the help of a solicitor, you can write a formal letter of claim that could help you to get the money you deserve. In serious cases where customers may owe thousands in arrears, a debt collection agency may be able to intervene and help directly retrieve the money that you are owed. Taking legal action will cost you money, but it could be worth it if you are owed a huge amount.
Look into cash flow finance
Don’t let late-paying customers put you in debt to others. If you are owed bills, there could be forms of business finance worth looking into such as invoice factoring. These finance options can give you the money you are owed and you may not have to pay it back until your customers have paid up. Take the time to compare different options out there – you will likely have to pay interest and ideally you want to reduce these interest charges as much as possible.
Take steps to avoid future late payments
It’s worth also taking steps to prevent future late payments. This could include credit checking customers before taking them on – a low credit score could be a sign that a customer cannot be trusted to make payments on time. It’s worth also sending payment reminders in case customers genuinely forget to pay. You could also consider rewriting your contract to give you certain powers if a customer refuses to pay on time such as withholding your service until the debts are settled or even charging interest on top. You should hire a solicitor to help you set up such a contract.