Steps To Approaching Late Invoice Payments to Your Small Business
With small businesses, the line between profits and losses can be thin. To sustain, they depend on significant monthly cash flow. Small businesses that entertain too many customers who do not pay invoices on time, or worse ignore them entirely, can struggle to stay afloat. How do you deal with the situation? These tips can guide you in dealing with customers who don’t pay up.
Establish a Relationship
Perhaps you have customers of concern with whom you do not have close contact. For various reasons, you should establish good relations with as many customers as you can. When it comes to unpaid invoices, having build trust can form the basis for getting results that would not happen otherwise. Customers who can truly put a face to the business, are less likely to stiff them.
Reach Out
However, you still may have to reach out to get that payment. Even if you have a cordial business relationship, this process can be tricky. Though your cash flow depends on regular payment for goods or services, you do not want to back anyone into a corner or give the appearance of mistrust; the ends may not justify the means if you lose a long-term customer.
Before picking up the phone prepare by going over the current and past invoices. Has the customer consistently paid on time in the past? If so, this time may be an error. Otherwise precisely spell out the particular terms of the invoice when you call and ask when it can be taken care of.
Keep Pushing
If payment has not arrived by a newly established deadline, follow up immediately by sending a second invoice or a statement, clearly noting its past-due status. Again, be clear about expectations, including the days overdue and the penalties accruing for late payment.
Enlist Support
If the process stalls, consider collection — as a last, but a necessary, resort. By doing so, you remove some of the emotion from the operation and take the pressure off yourself as a third party takes over. You also then have a stronger legal case if you need to pursue matters further. Be sure to keep a detailed paper trail.
At this stage, if too many customers are leaving invoices unpaid, you may need another kind of support: Consider obtaining small business financing to keep your cash flow strong.
No matter how frustrating it can be to deal with financially negligent customers, you have to try to work with them to take care of outstanding balances. By being proactive and positive, you will more likely find your invoices addressed than if you push too hard or leave too much to chance.