Delayed payments can send shockwaves through any business. Not only can they disrupt cash flow, but they can lead to strained relationships and lost productivity.
Clients may be late paying their invoice for any number of reasons, from cash flow problems on their end to administrative errors. Regardless of the cause, though, it’s important to promptly address the issue.
In a post on the U.S. Chamber of Commerce blog, writer Miranda Fraraccio says that when a customer is late paying their invoices, you should be timely, proactive and professional in your initial conversations with them.
What steps should you take to address the situation? We share Fraraccio’s guidance in this issue of PromoPro Daily.
Reach out to your client. The best way to get to the bottom of the issue is to start a conversation. Call or email your client and let them know you’re checking on an overdue invoice. They may have simply overlooked it, or they might be dealing with a financial constraint on their end. Communication is key, Fraraccio says.
Send an invoice reminder. If you can’t reach your client, resend the invoice. Fraraccio recommends keeping a friendly tone rather than accusing the client of not paying. Try to offer some understanding.
Begin a reminder process. After you’ve contacted your client and sent another invoice, Fraraccio says it’s time to start the dunning process. Essentially, this means reaching out to your client with a written reminder, followed by two warnings. You can then escalate the matter to a collection agency to recover outstanding payments.
Stop all work for the client. Fraraccio says you should not do any additional work for clients until they pay their invoices in full. Continuing without full payment poses additional financial risks for your business.
Enter formal dispute mediation. Another idea is to bring in a neutral third party to mediate disputes with your B2B clients. During this process, Fraraccio says a mediator facilitates meetings, helping both parties reach a mutually agreeable resolution.
Protect yourself in the future. To keep this from happening again or with other clients, consider asking for a deposit up front or require full payment before the completion of a project.
While late payments aren’t ideal, you can ensure smoother interactions by communicating your payment terms and communicating clearly. You might even offer incentives for paying early or implement penalties for paying late. In the end, it’s all about creating the best professional relationship for all parties involved.
Compiled by Audrey Sellers
Source: Miranda Fraraccio is a New York-based writer with nearly 10 years of experience.
