Have you ever been hit by a late payment and not sure how to handle the delicate situation to make sure you collect your payment and maintain a good customer relationship?
Even the best customers and businesses can become late payers for a whole range of reasons, which can be beyond their control. When this happens, it can put a strain on both the customer and supplier, which can damage the entire business relationship and even lead to non-payment.
To prevent late payment turning into non-payment, which can culminate in lengthy and expensive proceedings as well as the breaking down of relations, you should:
- Avoid making the situation worse
- Maintain open communication with customers
- Understand the customer’s perspective
- Use an intermediary, like Euler Hermes
Step 1: Avoid Making the Request for Overdue Payment Worse
Stay calm. Don’t put too much pressure on your customer. Although your worries are completely understandable, pushing your customers is not usually constructive, (especially if things may not be 100% in their control), and could result in a clash.
Don’t harass your client. Harassing looks like calling a customer every single morning for 60 straight days and screaming at them. Persistence looks like calling every seven to ten days and giving the client options by which they can start paying off the debt.
Don’t overplay an emotional connection. It can lead to later payments for supplier and customers who know each other as the customer may take advantage of this. What’s more, be very cautious about threatening with legal proceedings as this is unhealthy for the long-term relationship.
Step 2: Maintain Open Communication with Customers
Lack of communication between customer and supplier is often a root cause of tension surrounding payments. For customers, the most common reason behind late payment is cash flow problems, and they will often take an insular stance on this as there are feelings of shame around it. Customers may avoid calls or reminders , not always through conscious choice, as they don’t want to share their cash flow issues or find it hard to manage. They often have no other way of settling an invoice in compliance with initial terms, and you need to communicate with your client on this.
Make sure you document everything. Every time you talk to a client on the phone, follow the conversation by sending an email with the details of what you agreed. Certify and copy every letter you send in the mail and save email correspondence.