The reasons why your customers are paying late (and how to overcome them)
If you are finding that customers are regularly missing your payment deadlines, it can be a useful exercise to analyse the excuses they are making in order to spot any notable trends. If there are, they could tell you where your credit control processes could be improved.
For instance, if an unusually high proportion of customers are saying they never received an invoice, it could be time to start e-invoicing, or to make courtesy calls to confirm receipt the day it should arrive.
Here we look at some of the most common excuses and offer tips on how your business can overcome them.
“We’re waiting for payment from our own customers”
When cash flow is tight some businesses will put off making payments until they are in a better financial position. At times like these, they will often prioritise their payments and if you find yourself at the bottom of that list you could find yourself waiting a long time to be paid.
One way that you can overcome this is to constantly keep in touch with your customers. By putting in frequent courtesy calls you can build a relationship with the customer and ensure that you remain at the top of their payment list.
Plus, if they are experiencing cash flow difficulties this dialogue could allow you to find this out ahead of the payment date so that you can adjust your cash flow forecasts accordingly.
This timeline suggests some good touch points to keep your invoices front of mind throughout the credit control process.
“We’re waiting for payment authorisation”
Some companies, particularly larger ones, have strict payment procedures in place that need to be navigated successfully in order to get payment on time.
Learning these processes before it gets to the invoice due date will ensure that you never hear this excuse again.
For example, do you need a purchase order number? If so, have you referenced this on the invoice?
See how we helped our client get paid when a large business refused to acknowledge the debt or provide a purchase order number.
“Our terms take precedent”
Especially when dealing with larger businesses, it’s not uncommon to experience poor payment practices as a result of supply chain bullying.
One of the best ways to safeguard your business against these practices is to make sure you and your client are on the same page from the beginning. This can be achieved through effective terms and conditions.
By clearly stating what you expect from the client and what they can expect from you from the outset, you are setting expectations that could help to limit disputes and avoid any potential surprises in the future.
Here are more tips on how to perfect your terms and conditions to protect your business.
“We need a copy of the invoice”
Whilst creating the perfect invoice is a vital element of getting paid on time, arguably it’s what happens after you send the invoice that is more important.
Whether your customer says that they never received the invoice, or that they lost it, it’s important that you discover this as soon as possible to prevent late payments.
Putting in a courtesy call on the day you expect the invoice to arrive to check that it did will ensure it got there on time. Or, switch to e-invoicing so that you don’t have to worry about invoices getting lost in the post.
Here are 10 common invoicing mistakes that delay payment. Is your business making any?
“We can’t afford to pay”
With rising business costs, widespread late payment and increasing economic uncertainty it’s not surprising that some businesses are struggling to keep on top of their cash flow. And, as a result, some customers may not be in a position to settle their invoice with your company.
In these instances, it can be beneficial to set up a payment plan so that you get paid, even if it’s over a longer period of time.
To limit this happening in the future, perform credit checks of all your customers, existing and new, to check the risk they pose to your business before offering credit terms.
This blog post looks at the pros and cons of credit reports. Could utilising them protect your business?
“We forgot to pay”
Whether it’s genuine or simply a stalling tactic to delay paying you, if your customers are repeatedly coming up with this excuse it could signal that you need to interact with them more throughout the credit control process.
As well as calling to check that the invoice has been received, you could try putting in a courtesy call a few days before the invoice is due to remind them of the upcoming deadline and confirm methods of payment.
This will keep your invoice front of mind and ensure that they don’t forget about making payment.
Here are some tips on what to cover in your courtesy calls.
“We’re disputing the invoice”
Unfortunately, there will always be occasions when a customer might dispute an invoice.
Whatever the reasons for the complaint, the way a dispute is handled can impact the speed at which you get paid.
This is why it’s vital that you have a set procedure for dealing with these issues when they arise.
This blog post offers some tips on how to quickly resolve payment disputes.
Could your business benefit from some debt collection support? Call us today on 0800 9774848 for more information about how we can assist as a specialist debt collection agency, or get an instant quote…