With late payment problems a constant burden for small business owners, we look at the most common delaying tactics used by customers, and how you can overcome these late payment excuses.
1. I can’t afford to pay you until my customers pay me
This is a difficult one; can the customer make an acceptable immediate part payment? You need to determine a precise time when your client will be able to pay; can you get post-dated cheques that are dated at intervals acceptable to you?
2. I’m not paying, there is a dispute!
Is there a dispute? If there is then the client may well have good reasons not to pay! You need to establish as a matter of urgency precisely what the dispute it, and how to facilitate a resolution to the problem and secure the payment.
Whatever the outcome, it is always good practice to confirm the remedy in writing for clarification purposes and to further demonstrate that you have rectified the problem. This is one of the reasons why we recommend you call your customer seven days after sending out the invoice. This can often resolve any alleged disputes before your invoice even becomes due for payment.
3. I have not had the invoices
This is another old one! It is always good practice to telephone the client seven days after sending out the invoice to confirm that is has actually been received, together with any supporting documentation, and checking that all is well with the goods or service provided (remember to make a note of who you talked to, and the time and date).
4. I returned the invoices because the order number was wrong/not on the invoice, the wrong company name was used, was priced incorrectly
It is imperative to ensure that your invoicing documentation is correct FIRST TIME otherwise you are giving your customer a legitimate reason to delay payment to you.
If you receive purchase orders then read them and ensure that you comply with their conditions of order. The only exception should be if you have a written, signed agreement that allows your T’s & C’s to override theirs.
Always ensure that order numbers and client details are correctly quoted, and the invoice is addressed to the correct company. If in any doubt then telephone the person who has given you the order to confirm the necessary details.
Make sure that the invoice is checked before being posted to the client and that it is correctly priced. If there is a variance in the cost agreed, ensure your client is satisfied with the explanation. Again we recommend this is confirmed in writing.
5. The authorised signatory in not in the office / away on business /sick / on holiday so can’t sign a cheque
You need to ask yourself certain questions when faced with this type of response; Does their business now grind to a complete halt because of this individual’s absence?
Find out if there have been any pre-signed cheques that can be used to make payment to you or if there is someone authorised to arrange an electronic payment to you via BACS etc.
Alternatively, establish precise time-frames as to when the person will be back and ensure you re-contact on that day.
6. The Director / Owner has died
Somewhat rare but tragic when this happens, but business life goes on!
If the firm is a sole proprietorship then effectively the business has ceased, however often it may continue operating a surviving relative in effect taking over the reigns.
In law, you have a claim on the estate of the deceased, however a tactful telephone call expressing sympathy and querying how the business is to be continued and by whom may be fruitful.
If a partnership, then the partners have ‘joint and several liability’ to the debt and should pay. A respectful wait may well be appropriate. If a limited liability company, then the business should continue trading.
7. We have ceased trading / are in liquidation / receivership
Often this is just a ‘scam’ to avoid payment! You need to work out precisely how and when this occurred. Is the company/ business in ‘formal insolvency’? (i.e. liquidation, receivership, bankruptcy, IVA etc?) If it is you need to find out what firm of insolvency practitioners are dealing with the administration of the case.
Contact them without delay and lodge a claim as soon as you can. If you hold reservation of title or hold any intellectual rights or have any security you need to make the insolvency practitioner aware of this right away.
You will also need to provide evidence that the company in Liquidation / Receivership / Administration, etc. has signed and accepted your terms and conditions of business. Without this you stand little or no chance or retrieving any goods or property from the Insolvency firm dealing with their affairs.
If the business has merely ceased trading again you need to satisfy yourself that the business has no assets in order to make a commercial decision whether or not it would be appropriate to pursue the debt via legal channels.
8. You will have to wait until we have paid higher priority suppliers / creditors
This really is NOT ACCEPTABLE. There is a saying in credit management circles that ‘HE WHO SHOUTS LOUDEST GETS PAID FIRST’.
You need to speak with your client and explain your terms of payment, request immediate payment and pursue the monies vigorously.
Once again, this is why at the outset, you must ensure that your client is aware, unequivocally, of your payments terms and that you expect to be paid on due date.
9. I’m in the process of changing banks
Not uncommon these days, but does their businesses again grind to a complete halt? This is doubtful and normally there are some provisions made to access funds.
You need to establish exactly when this problem will be resolved. Can the client pay by credit card if you organisation accepts this method of payment. You can always setup a PayPal account to accept payment by credit card)
Get a firm time-frame for resolution of the problem.