How to effectively deal with late payments

Getting paid on time and in full is just as important as signing the deal or making the sale. But it’s a frustration that every business is likely to face at some stage. Chasing after late payments is not only time consuming and stressful, but it can have a significant impact on your cash flow and a knock-on effect on your business’ viability.

Here are 5 tips to mitigate the effect of late payments

Set your payment terms in stone

Ensure your customers are clear on your payment terms, such as payment deadlines and any penalties for late payments. Communicate these terms upfront so customers know what to expect, and you can remind them if needed, avoiding awkward conversations or surprises later.

Tip: Build a relationship with the person responsible for payments to ensure your invoice is received and you have a direct contact for any payment discussions.

Invoice on time

Sending invoices promptly and accurately increases your chances of being paid on time. Delays on your end could mean your customer misses their payment cycle, resulting in further delays.

Tip: Double-check all invoice details for accuracy to prevent errors that could delay payment.

Follow up immediately

Address overdue payments as soon as possible to protect your cash flow. The longer a debt is outstanding, the more it can impact your business. Call to confirm receipt of the invoice and politely remind them of the payment terms. Be persistent and continue to follow up as needed.

Tip: Send regular, polite reminders as the payment deadline approaches. Prepare a script to help guide your conversations.

Make it easy to pay you

Simplify the payment process for your customers. Include your banking details and payment terms on every invoice, and add VAT or tax details if relevant. Consider offering early payment discounts to encourage prompt payment and improve your cash flow.

Tip: For recurring payments, consider automating the process to avoid chasing payments each month.

Enforce your payment policy

Be firm about your payment policy. If a customer pays late, apply penalty fees to cover your costs. You may also need to pause your services until outstanding payments are settled.

Tip: Remember, it’s your right to be paid. Ensure your terms are clear and stand your ground.