It is an uncomfortable feeling to chase a customer for money. However, don’t think you are being rude by chasing. You have supplied the products or services and if the standard is satisfactory then you are entitled to be paid on time.
There is a huge amount of information online to help you establish a process for chasing late payments. However, what it does not do, is give you the time to execute the process!
You are flat out with work, not getting home until late and certainly not back in time to give the Accounts Department a quick friendly call to find out where your payment is. You could possibly make that call in your lunch break (if you have one!)
Below is a guide to help you set up your payment processes, so you hopefully won’t have to chase.
SET PAYMENT TERM EXPECTATIONS EARLY
Find out who to speak to in the Accounts Department and understand what information they need to process your invoice. If you are dealing with an individual, let them know what your payment terms are and confirm they are happy with the conditions.
Setting your expectations by discussing your payment terms early on can prevent problems further down the line.
Understand your client’s payment processes as well. Some individuals may only do banking on a certain day of the month so you will know not to expect payment before that date. Some companies have certain ‘pay run’ dates and don’t pay outside of those dates, so just make sure you are not wasting time unnecessarily.
DAY OF SENDING THE INVOICE
Ensure you address the letter or email to the individual you contacted or if you are using an app, call the contact to make sure they have received it and check it includes the information they need.
10 DAYS BEFORE PAYMENT IS DUE
It is sometimes worth checking that your invoice is processed and due to be paid. Contact the Accounts Department and ask if it’s ‘in the system’ or ‘on the next pay run’.
DAY PAYMENT IS DUE
Have a quick check to see if the payment has been received, if not, you can then start the chasing ‘process’!
2 DAYS AFTER PAYMENT BECOMES OVERDUE
Check if there is a problem that has prevented payment. Find out what you can do to resolve it. Agree a date when you can expect to receive the payment.
CONTACT WEEKLY UP TO 30 DAYS OVERDUE
Week 1 – With a friendly phone call, remind them that the agreed date has passed and agree another date. Ensure that you document time, date, contact and details of the conversation.
Week 2 – You are starting to formalise communication. Send an email reminding them of your phone conversation on X date. Ask them to help you understand why payment has not been made and ask if there is anything you can do to help. It may be that they need different payment terms rather than paying the whole amount to help them with cashflow. Agree the next payment date or new terms and send another copy of the invoice and email detailing your conversation.
Week 3 – If it is a company, escalate the communication to a more senior person advising them of the issue of late payment and for both companies and individuals, explain that if payment is not received by X date then you will be taking further advice and that X% interest will be charged on late payment (as long as it is within Government guidelines).
Week 4 – Final warning. Consider what you are prepared to do and advise of exact next steps you will be taking i.e., County Court Judgement or Debt Collecting Service.
It is advisable to do some checks to see if the customer is likely to pay you. If they have bad debts or a history of refusing to pay what they owe, it is a good idea to escalate or take next steps earlier than usual.
Be sure to know your legal rights before advising your clients of what action you will be taking.
As you can see, this process is very time consuming and even more so if you have several clients paying late.
OpenDesk Virtual Business Support
can help you every step of the way.
Call Fiona on 0754 1122110