In terms of general unpleasantness, chasing payments is roughly on par with squeezing lemon juice into your eyes. Where to start? It’s time-intensive, socially uncomfortable, and when done wrong has the capability to destroy hard-earnt business relationships.
In fact, a hard-nose discussion over late payments and imminent consequences could be the best way to kill trust and good will.
So how do we avoid this worst-case scenario? Firstly, acknowledge most businesses are well-meaning and intend to pay on time. Most. There may be legitimate reasons why debtors have missed their due dates. Their suppliers are late paying them, they had unexpected expenses come up, or they’re just behind on their invoice processing after a staff member left the business. Not to mention the most common cause – straight up disorganization.
In most of these scenarios people won’t want to volunteer the real reason for late payment. The underlying fear is that they’ll be seen as unprofessional, or worse, the financial health of their business is a concern. So how best to navigate this tricky situation?
Here are 4 approaches you can employ:
Give your debtor an ‘out’ – re-attach the invoice.
There’s a lot to be said for sparing your customers from coming up with an excuse by simply giving them one. If everyone partakes in the ‘lost invoice charade’, blames terminal busyness and moves on, its invariably a good outcome for everyone.
And if you’re thinking this approach doesn’t apply to electronic invoicing, don’t worry. A lost invoice due to an over-enthusiastic inbox cleanout is entirely believable!
Use automated payment reminders
If it’s awkward for you to chase late payment, rest assured its unpleasant for the person on the other end too. By sending out automated communications you can say what needs to be said without any of the awkwardness that comes with a face-to-face or telephone discussion.
But before you hit ‘go’, this isn’t the ‘all-clear’ to send blunt threats! Tone is still important, and there’s no reason why automated communications can’t be personable and pleasant.
The objective should be to get paid this time and next. To do that you’ll need to come out the other side with business relationships intact. So take care in crafting your automated late payment reminders, and don’t forget to link to a viable payment method or the option to…
Offer standard flexible payment terms as a plan B
Standardized payment plans are common practice in Debt Collection agencies for good reason. It’s a good compromise for debtors with a legitimate inability to pay, but the key point here is to standardize these ‘plan B’ payment terms.
This stops wasted time in negotiations and customizing payment terms, but more importantly allows you to automate your payment plan options.
Remind your debtors of early payment discounts (or late payment fees)
A great way of subtly incentivizing debtors to swing in to action is to remind them of any payment terms ‘for next time’. If you do offer early payment discounts, now is actually a great time to bring it up. And on the flipside, you can hint at the need to charge late payment fees to recoup the costs of chasing overdue invoices.
The final word – plan for late payments
Chasing payments is an important part of doing business, so don’t treat it as an unexpected inconvenience week after week. Plan for it and follow best practice. Follow these 4 tips and you’ll save time, improve cash flow and maintain business relationships. Start the conversation today.
You might also be interested in: Automated payment reminders that will SLASH your accounts receivable.