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4 ways to handle people that just won't pay on time

Jared Bilski
by Jared Bilski
December 11, 2008
  • Credit and Collections
  • Policy and culture
2 minute read
  • SHARE ON

Even if your company is one of the lucky ones that continues to thrive, chances are many of your customers aren’t in the same boat. Here’s help for dealing with those perennial late payers.

Clear, across-the-board terms. It happens more often than you think: Businesses, especially smaller ones, don’t have a clear payment-and-collections policy that lets customers know what’s expected, when it’s expected and what the penalties are for paying late.

The policy should include some form of the following:

  • payment due dates (usually no greater than 30 days after good/service exchange)
  • the penalties for paying late (late fees, how many days late the invoice will be forwarded to collections, etc.), and
  • the payment methods your company accepts.

Give ’em a reason to pay early. With the economy the way it is, your customers will likely jump at the chance to save in any way they can. Offering companies a discount — say between 5-10% — for paying early should help to weed out a good portion of your late-paying culprits. On the other end of the spectrum, adding the same percentage fees to late payers may work just as well.

Don’t sit back and wait. There are many surveys our there that prove the longer a company waits to get paid, the less likely they’ll be to see any of the bill. Take an offensive stance on late payers. Start with reminder calls and, if the customer says they can’t pay, try and arrange payment plans that work for both of you.

Stick to the plan. Remember, if all else fails, it’s time to practice what you preach. When customers go past the time clearly established in your formal policy, don’t hesitate to go to collections. You can use “pre-collection” notices as a scare tactic, but eventually may have to use the real thing. Keep in mind, collection agencies take a cut — around 30% — but it’s better than nothing.

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