April 10, 2021
Understanding why your clients don’t pay you on time can give you the keys to solving delinquent payment problems. Below are four common reasons why your clients might pay you late.
Sometimes clients have a loan which mandates that the account has at least x dollars in it, this is one of the most common late payment reasons. If your clients are consistently late because they just don’t have the cash, you can try offering incentives to pay on time or charge higher late fees to get higher on their list of people to pay off when they do have cash come in. If cash flow problems are common in your industry, make sure to run credit checks beforehand.
Some companies just have issues with their accounting departments. If it’s complicated it may be a way to facilitate more time to pay off an invoice or they have too many different types of payments to process. Learn their system to the best of your ability so you don’t accidentally get lost in the shuffle. Disorganized accounting systems should throw up a huge red flag about working with this business. You will need to follow up regularly and consistently with these problem clients to demonstrate that you will pester them (politely) until they get into the habit of paying on time.
If you are not providing a company’s major source of income, you will not be at the top of their priority list. That doesn’t mean they should ignore you either. Make sure to be clear and firm about being paid on time. Offer incentives or charge for late payments if you feel it’s appropriate. Always, always, always send out invoice reminders shortly before the due date.
This became a huge problem 2008 when companies became significantly more tightfisted with their cash flow and how much cash they wanted to keep in hand. In every industry, what many companies found is they could pay their suppliers late with little fuss because the suppliers did not want to risk losing the business. Other companies will just pay late if you don’t consistently follow up. You again need to be upfront and firm about having them make payments on time, but avoid being aggressive.
Politely persistent should be the motto. If your clients do start trying to consistently pay you late, push back. Most companies don’t expect resistance to this behavior from their suppliers and will treat you with more respect for not standing for such behavior.
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Armatic Co-founder and CTO