Small Business Tips: Effectively Collecting Late Payments From Your Customers

As a small business owner, or independent contractor, your biggest problem isn’t always finding customers. It’s finding paying customers. When your clients don’t pay on time, you can’t pay your bills and put food on the table. Here’s how to effectively collect on late payments without getting too nasty.

Send a Friendly Invoice

Is it all one big misunderstanding? Sometimes, clients don’t pay because they’re expecting an invoice and they never got one. If you’re working with other professionals, they often expect that you will send out at least one invoice. Sometimes, even when you do send out an invoice, it gets lost somewhere between the receptionist and the HR or billing department.

Fortunately, you can create a free invoice with companies like Aynax.com if all you need are a few invoices. Its free trial gives you unlimited free invoices for 21 days. After that, you have a choice to stay on or quit the service. If you stay on, the professional upgrade is $9.95 per month. It’s a reasonable deal considering your invoice amount is almost certainly more than that.

Begin the Negotiations

If it’s clear that the client is tardy, and it’s not a misunderstanding, it’s time to open up the lines of communication. Many business owners who can’t pay their bills are embarrassed about their situation. They’re in business. They’re supposed to be beyond “late pays.”

Any debt collector will tell you, however, that anyone can become a tardy payer — even businesses. Debt collection is largely a game of negotiation. You call up, and ask why the person is late on their invoice. You get answer that may or may not include an excuse.

What you ultimately want is a commitment of at least part of the invoice paid by a specific date. You may need to break the invoice up into smaller invoices or you may need to finance the invoice through a factoring company to get your money.

Focus On a Win-Win Solution

Always focus on a win-win solution. When clients feel they are being strong-armed or pushed, they will resist. Yes, they owe you money, but in their mind you are the one that needs to be flexible and accommodating. You need to solve customer problems so that there’s nothing standing in the way of the customer paying his or her invoice.

Listen to Your Clients’ Concerns

Listening is a lost art form. When your client can’t or won’t pay, there’s usually a reason. You might not think it’s a valid one, but that doesn’t matter. What matters is the reason. Usually, it will be an objection of some sort. Either, they don’t feel they owe you the money, there’s a dispute about service or the product delivery, or they just don’t have the money right now for some reason.

Your job is to listen and figure out what the problem is so that you can solve it or help them solve it.

Be Confident of Your Value

Many small business owners are afraid to ask for money — especially if the invoice is seriously delinquent. Don’t be afraid to ask for money. Have confidence in your own self-worth and value.

Be Polite, But Firm and Direct

You’ll get nowhere treating your late-pay as a criminal. You need to be friendly and service-oriented, even when the customer hasn’t paid you yet. At the same time, don’t be a pushover. You must be direct and persistent in asking for the money. It may take you several weeks or months to finally collect.

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