Let's talk about Late Payments

Explicit payment terms

• Make your payment terms clear and consistent from the start and let customers know about any late payment charges to save disputes.
• The standard term of 30 days gives a basis for you to chase payment and take further action if necessary.

Amend the frequency of invoices

• If you’re concerned about a customer, consider invoicing weekly rather than monthly. That way, they need to pay you quicker and if they do pay late you can charge a late payment fee on each invoice and reduce the risk.

Don't give customers an excuse not to pay

• Sound familiar, “I posted the cheque last week”, or “I’ll make the payment in a couple of days”? In many cases, excuses will simply mean delaying payment for as long as possible.
• Make a conscious effort to send reminders as invoices become due.
• If payment is late, pick up the phone and have an informal conversation to understand why payment is late. If there’s no response within two business days, follow up again and if you’re not satisfied with the explanation, request a face-to-face meeting to resolve the issue.

The right invoice format

• Invoicing is essential and there is a basic format that you should stick to. This document is important because you need to keep a copy as a record of your sales, and your customer needs to keep a copy as a record of their purchase.
• You should clearly display the word “invoice”, and include a unique identification number, your company name, address and contact information, plus the company name and address of the customer you are invoicing. Also, a clear description of what you are charging for, the date the goods or service were provided, the date of the invoice, the amount(s) being charged, VAT if applicable, the total amount owed and the payment due date.

Remove credit terms for persistent non-payers

• If you have customers who persistently pay you late, it can often help to place them on a ‘stop list’ or a ‘watch list’.
• You should let them know they won’t be supplied with any further goods or services until all outstanding invoices have been settled at the very least, while those on the ‘watch list’ should no longer be offered credit terms without an up-front payment or deposit.