When it comes to collecting money from your late-paying customers, it is not just incredibly frustrating it is also demoralising – and this is especially true for smaller businesses. Unfortunately, most businesses are likely to encounter this at some stage.
It is more damaging for freelancers too, regardless of how large and profitable their client list may be. These section of the business world is also much more likely to encounter late payers. The Freelancers Union says that 71% of freelance workers will struggle with late-paying clients at some point.
Some steps can be taken, however, to help you recover payments from late-paying customers.
- Polite reminder emails
The first step that it is recommended you take when a customer’s payment is overdue, is to send a polite email to give them a gentle reminder. Perhaps the best moment to send a reminder is right after the due date, as in the next day.
An email template can help a great deal with this, prepared and ready and as polite and professional as possible. This template can then be personalised to each customer, as needed.
Items that should be included are the date the payment was due, the payment methods that you accept. If any late payments fees may be included in your terms, gently remind of those too.
Of course, it is always a good idea to attach the original email also for reference.
Give them a call
If you do not have any success with reminder emails, then the next step needs to be simply giving them a call. Taking the reminders as inspiration, be polite and friendly. Ask the customer if there is a specific issue that has caused the payment prevention.
Try to work out a solution between yourselves – it could be a simple issue a payment not getting through for some reason. If possible, try and secure payment while you are over the telephone via a credit card. Failing that, get your client to agree to a specific payment date.
Stop work on their projects
If previous steps have met with resistance or just ignored emails, calls or payment is simply still not forthcoming, then stop work. Nobody is here to work for free and by stopping work until you are paid, the customer has added incentive.
By paying, their projects can continue and you are not wasting your time or losing more money because of an unreliable client.
Speak to a debt recovery agency
Getting outside help in collecting the money that you are owed can be a good way of getting back some, if not all, of the missed payment(s).
Using a collection agency can save you a lot of headaches and stress, knowing that professionals are on the case on your behalf. When customers have professional debt recovery officers at the door, they are much more likely to make payments.
Consider a small claims court
If the amount that you are owed is not too great (up to £10,000) then another option, if you prefer a court claim, making an application through the small claims court may be the option for you. Fees for small claims are relatively inexpensive, so they can be a cost-effective solution to your payment woes.
Another attractive feature of the small claims court is that you do not need legal representation, although it is certainly permitted if that’s what you want.
Protecting yourself in the future
In the future, to protect yourself, you may want to consider taking a couple of preventative action.
- Take deposits
- Ask for total payment before work starts
When requesting deposits, it is commonplace to ask for between 25% to 50% of the total fee before you begin work. Alternatively, if the amount that will come due, is not so large, then many smaller businesses will ask for full payment upfront – this is normal practice and nothing to be embarrassed about requesting after all this is normal procedure when ordering anything online.
Late paying customers can be stressful, not to mention potentially damaging for your business. The advice and tips outlined here just might help you to get the money that you are owed, as well as help prevent loss in the future too.