A business cash flow becomes a slippery slope when you get clients who pay late. Late paying clients have a significant impact on your cash flow that could even out your business at risk. The key to business success is to know the right ways to manage and maximize your cash flow, and this includes payment collection.
Here are some tips to help you deal with late-paying customers:
Reminding your customers a few days in advance about their payment is a good idea. Advance reminders alert customers and often, they appreciate the reminder.
When it comes to sending follow up emails or messages for late payments, it’s essential that you do this right away. Therefore, you need to develop a system for contacting your late-paying clients. You can start by sending an e-mail the day after their due date, then a follow up via phone call the next day. You also might want to consider getting a Customer Relationship Management (CRM) software to help you better handle your communication with your late-paying clients. Consistency is key. In a study by Credit Solvers, consistent communication strategies were 67% more likely to recover bad debts compared to those who did not communicate or did not have a specific system in place for follow up timesframes and escalating methods of communication.
Let the Whole Team Know
The whole team who does payment handling in your business must be aware of the late-payers. You don’t want a client to get a call from your business after they’ve settled their payment. Everybody must be kept in the loop. As mentioned, a CRM would be helpful in times like this to ensure that all data are centralized and accessible to certain members of the team.
Late payments can be a great source of stress, and in some cases, you might find yourself losing your cool. Instead of lashing out on a late-paying client, it’s crucial that you stay calm as much as possible, Most of the time, late payments happen because of misunderstandings or miscommunication. Always be polite when reminding a customer about a late payment.
Communicate via Phone
If a late-paying client hasn’t paid after the first reminder, follow up again through phone. Phone calls are more effective than sending emails. Emails are easier to ignore, while phone calls are harder to ignore.
Know the Reason
Encourage a late-paying client to be honest with you. Ask if there’s a problem with the service or product that they received, or if there are financial issues that prevent them from paying. Knowing the reason will help you analyze whether a customer is really willing to pay or not.
Try to Negotiate
At the end of the day, you still need to get paid and you can’t force a late-paying customer to pay especially if they don’t have the means. Try to see if you can work out a solution with your client, such as a monthly payment schedule.
Handling late-paying clients can be difficult and it will surely test your patience. However, staying persistent and polite at all times are important for any business today. Follow the tips listed above to help you better deal with late-paying clients.