Unlike most clients that are sometimes late in payments for legitimate reasons, chronically delinquent clients habitually pay late, pay rarely, or in some cases, never pay at all.
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Serial late-payers are the bane of businesses of every size. Delinquent accounts, however, are a particularly serious problem for small businesses. Having enough habitually delinquent customers compromises a small business' cash flow. To make matters more difficult, small businesses rarely have the tools and expertise needed for collecting on delinquent debtors.
The following are some tips for small businesses dealing habitually late-paying customers.
Have a process in place
No matter how small a business is, it must develop and follow a clearly defined set of policies for late-paying customers. These procedures must include details such as payment deadlines, late fees, and frequency of payment reminders.
Note that there shouldn't be a one-size-fits-all approach to all late-paying customers. A customer who regularly pays on time but forgot to drop a check in the mail for the last bill is dealt with differently than a customer who has never paid on time.
Communicate well and often
Businesses must invoice their clients on time, and clients with a history of late payments must be contacted on the date the payment becomes overdue, preferably over the phone or face-to-face instead of through email or regular mail.
Business owners should calmly yet clearly inform a late-paying customer about the overdue bill, ask for his reasons for paying late, and ask him to commit to paying the amount owed at a date both parties agree upon.
Consider hiring a collections agency
If a client refuses to pay or ignores all attempts at communication and negotiation, and his or her account is past due by more than the acceptable amount of time, business should consider hiring a collections agency. Taking a client to a small claims court can be time-consuming and costly, whereas collections agencies take care of the legwork when it comes to chasing after late-paying customers.Collections agencies allow businesses to get on with more pressing matters while recovering delinquent debts.
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Collections agencies are typically paid either a percentage of the debt recovered or a standard amount of commission for certain types of debt. Others charge monthly rates, while others offer the same services for a flat fee.
Brennan and Clark offers customized account receivables support solutions that eliminate credit losses. To learn more, like this Facebook page.
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