Impacts and Consequences of Late Payments on Business

The barrier of late payments is natural, but so are the solutions that can help you minimise this situation. You must set up timely payments and follow up appropriately to limit the impacts discussed above. Below are five tips to help you deal with late payments efficiently without losing your customers or destroying the business relationship.

1. Define your terms and expectation from the beginning

Many times, the issues we face with our customers persist because we did not define some terms clearly at the beginning of our relationship. How did we know this? We noticed that for businesses that we also patronize, we know clients that we cannot delay their payments. 

As a business owner, let it be clear to your potential customers how you collect your payments. For instance, is it payment before service or product delivery or on delivery or verification? Let these terms and conditions of purchase be clear before you do the first business. 

Also, highlight what the customer needs to pay for and when the payment is due. Sometimes, you should add penalties for late payments on each invoice. As a result, when an issue arises around defaulting, the conversations will be less awkward because it has been stated.

You can shorten your payment terms but discuss them with existing and new customers first. While the discussion is going on, try to negotiate any specific terms peculiar to the customer and draw a conclusion. Moreover, you can send in an early request for the payment before the due date. 

2. Send out invoices on time.

If you want your customers to make payments promptly, you must also learn to send them invoices early enough. Don’t wait until the due date before your customers get their payment notifications. Also, when sending out the invoice, ensure all the details are correct to avoid rejection and delay. 

A typical invoice should include the following information:

• Your company name with logo, registration number, address and company contact details
• Terms and conditions of payment
• Product or service details
• Order or reference number
• Amount due
• Date and number of invoice
• Name and address of the customer (individual or company as appropriate)
• Your payment details to use
• Tax details, including VAT rate and amount. You can also show your VAT breakdown and registration number for each invoice.

3. Make payments easy for customers.

Don’t assume your customers know what exactly to do when it comes to payment. Moreover, having many payment options may throw your customers into the infusion of which option to use. So, if possible, suggest the preferred payment method for your customers and ensure it is the easiest for them. For instance, you should recommend online international payment platforms rather than direct bank deposits for international clients/customers.

Another aspect you should note is the payment notification you expect and how to verify payment when the customers pay. For physical stores, do all you can to limit queues at your payment points. Customers need to spend much less time paying than buying. So, there is no crime in having multiple payment collection methods, including online banking.

Some of the most standard payment methods every business should add for payments include

• POS terminals using debit or credit cards
• Direct cash deposits at store counters or banks
• Use of valid checks 
• Mobile payment collection through intermediate channels
• Bank transfers.

4. Discuss with your customers

As a business owner, you can continue to groan about payment delays without the knowledge of your customer. Therefore, discussing why your customers are not paying on time is essential. For one, they may have a good reason why payment is delayed. In other cases, the decision-makers may even be unaware of a delay. 

You may work out an alternative payment method or offer instalments in your discussion. In case of recurring payments, you may suggest automatic payment methods which can take off the burden of repeated payments. Any techniques that work for you discuss with your customers, and make it easy to find a win-win scenario for both parties.

5. Send regular reminders to customers.

Another costly assumption when expecting payment from customers is that they will never forget to pay. No. Instead, send out reminders to jog their memory about the delayed payment. At the same time, don’t just use a single reminder method such as an email. 

Also, make calls to the right contact person and decision-makers about the delayed payment. You may want to start sending out gentle reminders a few days before the due date of the payment and follow up if the due date passes. On the other hand, automating your reminders can help you save time and effort.