As inconvenient as it is, a late paying client is something all business owners will encounter. It’s one of those problems that could be a one-off and easily manageable if you have enough cash as a buffer. It becomes a real challenge when you don’t have that buffer and are reliant on prompt payment so that you in turn can pay your suppliers on time.

Late paying clients won’t necessarily always be late paying, just as prompt paying clients won’t always continue to pay you on time. Both types of clients need to be managed.

There are good practices to have in place to minimise the risk of working with a client who will pay late. Firstly, save yourself hassle and stress in the future by building your client relationship on strong foundations – this means being clear and upfront about your payment terms before any work commences. Document your terms and conditions and make sure the client agrees to them before you send an invoice. Secondly, utilise credit checking businesses as part of your onboarding process. This will give you an indication of their financial commitments and payment habits.

But that advice isn’t necessarily useful when clients are building up arrears with you, and you’re struggling to manage your own bills and expenses.

We’ve summarised 3 top tips for you to use when faced with a late paying client:

1. Send them a reminder

The first thing you should do is remind your client that their invoice payment is overdue. Don’t assume they are paying you late on purpose, they genuinely may have forgotten or overlooked your invoice.

Some people may feel awkward about reminding or requesting payment for an invoice, concerned they don’t want to appear rude or upset the client. If the client has breached their payment terms you have every right to contact them to get the invoice paid.

There’s lots of templates for wording such emails online (a quick Google search will help you get started) but to make this communication most effective we’d suggest that you always include:

• A copy of the invoice
• A copy of the payment terms they agreed to
• A reminder of how they can make payment
• A statement of account, especially if several invoices are outstanding
• You may feel it’s appropriate to inform them of any late payment charges you will be applying (if this is stated in the terms they agreed to) or that you will be placing their account on stop until payment in received.

Sending reminder emails can take time – it’s worth setting up automated processes where you can. The majority of cloud-based accounting systems will allow you to ‘switch on’ automated email reminders when an invoice is overdue.

2. Pick up the phone

If emails are going unanswered or promises of payment in the future are being broken, it’s time to pick up the phone. Sometimes we forget the power of human interaction! Make the call with an open mind – ask them what’s going on in their business, understand the process they follow to pay invoices and make sure you speak with someone who has authority to get the outstanding invoice paid.

Always provide a written summary of what was agreed on the call for transparency for all parties involved and also for the benefit of your records. This will support your case if you need to take legal action to reclaim your costs.

3. Consider professional collection of debt (or the small claims court)

We appreciate that no one wants to go down the debt collector route, but when you’ve exhausted all your options and your client is no longer responding to your requests for payment, it’s better to save your time and stress by handing the responsibility to someone else.

Depending on the amount owed, you can work with a professional debt collection service or use the small claims court. There will be some cost and time involved but you may feel boosted in morale knowing you are taking action to collect what you are owed.

Alternatively, you may evaluate that the time and expense involved with such services significantly outweighs the value of the outstanding debt, therefore deciding to write the debt off and accept the loss.

Any client who has persistently avoided payment of invoices should be blacklisted otherwise you may continue to put your business at risk.

Are late paying clients having a serious knock-on effect on your cash flow?

Then you need address it. Cash is the lifeblood of any business, and when your ability to pay your suppliers, even your staff, becomes restricted then you need to assess the cause.

Our team of recovery experts can help you to pick out the problem areas and take the right steps to fixing them. Problems can be resolved but the earlier you move towards a resolution, the better.

Find out about the experience of our team here. We’re ready to talk when you are – call 0808 196 8676.