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It’s all very well saying that if you do a job you love you’ll never work a day in your life, but loving your job won’t pay the bills, only cold, hard cash payments will do that, which means it’s important to stay on top of your cash flow.  With that in mind, here are five tips as to how to deal with overdue payments.

Minimise them by ensuring that your billing process works effectively

The number one tip for dealing with overdue payments is to do everything you can to prevent them happening in the first place.  Not to put too fine a point on the matter, if you are having regular issues with overdue payments then you probably want to take a long, hard, look at your business processes, right from your selection of clients to the way in which you conduct your invoicing.  There is a very good chance, you’ll find the source of the problem somewhere along that line.  Occasional late payments, by contrast, are essentially par for the course in business.

Assume ignorance rather than malice and start with a gentle reminder

In principle, it is the customer’s responsibility to pay you in full and on time as agreed in the terms of the agreement (assuming you’ve set them out effectively).  In practice, however, everyone slips up from time to time, especially in small businesses which do not necessarily have the resources to provide effective cover for staff absences.  If you go in all guns blazing, there is a distinct possibility that your attitude may annoy your client enough for them to pay their bill and then take their business elsewhere.  If, however, you start with a polite phone call, you are much more likely to get an apology and payment, or at least an explanation for the delay and a reasonable estimate as to when you are likely to receive payment.

If you work with international customers, remember that public holidays differ around the world and their impact can last rather longer than the day or days on which they are scheduled as people take leave around them.  Similarly, school holiday times also vary and can be disruptive to payment schedules as parents take time off work to look after their children.

Suspend any further work until the invoice is paid

Again, you may want to be careful with this, basically apply common sense.  If you’ve always had a good relationship with a client and you are reasonably confident that they will pay up in due course, then it may be worth continuing with the work.  This, however, should usually be the exception rather than the rule.

Follow up a phone call with a “firm-but-fair” email

A phone call will probably do the trick most of the time, especially if your client wants further work from you (and even if they don’t most clients will pay their bills regardless), but sometimes you will need to follow up with an email.  Again, be polite, but be clear about the fact that you expect payment and that further action may follow unless the bill is paid in full and promptly.

Be prepared to cut your losses

At the end of the day, there are basically only two reasons for a client to pay up.  One is honesty (and this thankfully works perfectly in most cases) and the other is fear of being sued.  If, however, a client is not particularly honest (or if they are desperate) and the payment is for a small amount, then, realistically, it may be more hassle than it is worth to pursue the debt through the courts.  This can be very frustrating, especially if you have the feeling that the client has been counting on you giving up without a fight, but it may be your only pragmatic option.

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