5 Tips to Deal with Late Payment!

Late Payment. It’s the phrase that we hear from business owners every day and across every sector. Periods of market uncertainty often trigger a push by large companies to lengthen payment terms. Everyone wants to hold onto cash longer, and get paid quicker.

So here are our TOP 5 tips to help you deal with late payment.

1. KNOW YOUR CUSTOMER

Whilst it may sound obvious or clichéd, people buy from people. Having a good relationship with your client or customer pays. You’re more likely to be able have an easier conversation negotiating payment terms or chasing any overdue payments if you’re on friendly terms. 

2. AGREE PAYMENT TERMS IN ADVANCE 

Late payment can sour relationships, so try to agree invoice payment terms in advance. This will enable you to plan for growth, prepare and pre-empt cash flow fluctuations. But as discussed in our terms of trade blog customers are not always able to offer payment up front and more often than not blue chip customers will insist on “standard” long payment terms. 

If you find yourself entering into an agreement with long payment terms – 90 days is not unusual – there is a discount tactic that you can apply – either by negotiating a price discount in exchange for faster payment terms or using an receivables finance provider. This way you can offset profit margin for prompt, reliable payment. 

3. INVOICING CORRECTLY AND PROMPTLY

Speed and efficiency are paramount to getting paid on time. It’s not rocket science – the faster that your accounts team generates invoices and sends them to the customer the sooner payment will be received. Electronic invoicing and automating the follow-up procedure can further speed up the payment process. 

But whilst organisation does play a part, so too does minimising invoice errors. Large companies have been known to wait until the day before payment is due to query a mistake. Remember to include payment terms, purchase order numbers (if applicable) and find out who you’re supposed to send the invoice to! 

4. CHASING OVERDUE PAYMENT IMMEDIATELY 

A product or service is just a gift until it gets paid. Obviously no business is really run on “gifts” so make sure that you respond quickly and efficiently if a payment becomes overdue. It’s often better to do this yourself rather than outsourcing. At the end of the day you have spent time building up good relationships with customers and heavy-handed attempts at collection or third party enforcement can, more often than not, backfire. 

For small companies which have a relationship with large corporates, this kind of negotiation can be very delicate. Their corporate structure resembles something of a maze and things can get lost between departments: your contact to the procurement or buying department and the accounts payable department. It’s always best to deal with the person you have a direct relationship with rather than creating or trying to navigate internal politics. Try to avoid turning the finance department against you – they may find another supplier. 

Saying that you have delivered against a promise so you may want to evaluate your relationship with them if they are a repeat late payment offender. 

5. SEEK FINANCE BEFORE YOU NEED IT

Managing cash flow is paramount to business success. Often businesses will see finance only when they need it and no one likes a last minute dash. With the emergence of alternative finance in 2012, there came the ability for a flexible or selective invoice finance pay as you go model. This means you can have an account ready and waiting for you and your new, or old, customers as and when you need it. 

Many of the providers, as in the case of Accelerated Payments, have bad debt protection or credit insurance included in the prices so that you will be protected against insolvency of your customer. 

IN SUMMARY

Remember to

Of course, like most advice, it is easy to offer and sometimes hard to follow – if you have any questions about the above please do get in touch with Accelerated Payments.