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How to Collect Late Payments From Customers Gracefully

late payments

One of the toughest challenges in business is collecting late payments. Is your customer trying to dodge your invoices? Did they simply forget? You want to gently remind them that payment is due but you don’t want to alienate them and drive them to your competition. This takes a lot of tact and knowing how to tread lightly. Here are some tips on how to collect late payments from customers.

Set Your Terms Upfront To Avoid Late Payments

The collection process can be set up before you ever lift a finger. Be clear and upfront about the payment terms before you start the job. Don’t expect clients to read the fine print, but go over it with them.

Some contractor work may warrant the formality of a written contract, but just getting a signature that the customer agrees to your terms for completing any work and the subsequent payment terms will go a long way to establishing expectations from the get-go.

This also provides support if you do have problems with the client paying. You can refer to the contract and signature and remind them that you reviewed the terms in advance. Ideally, it won’t come to this, but you’re covered just in case you have to be very assertive with the collection.

Offer Incentives For Being Timely

Consider offering the carrot or the stick when it comes to payment options. Actually, you can do both! Most of us are all too familiar with late fees if we pay a bill late. This is a business standard and should be part of your work agreements.

On the flip side, offer an incentive if they pay their bill early. Even a small discount, such as 5%, will appeal to most people. You could allow a normal payment period of 30 days, but give customers that 5% discount if they pay before 30 days. 

Hint: if you hate giving discounts, put in an extra 5% in your fees, then offer a 5% discount for paying early. Customers feel like they’ve gotten a break on the price, but you still receive the price you wanted based on your calculations of the cost of doing business.

Everybody’s happy!

Offer Plenty Of Payment Options

Everybody prefers a different way of paying. Some people like to pay with cash, some like debit cards, and some even still want to write checks. Others don’t even have a bank account at all — they like to pay every bill with PayPal or Venmo.

Make it easy for them. Offer as many payment options as possible so it’s easy to make their payment. Make sure they can also pay online if possible.

Have you ever had a hassle when trying to make a payment online for a bill? Did you feel like screaming, “Hey, I’m trying to give you my money here!” Make sure if you use a website it’s well-maintained and functioning properly so people can easily log in and take care of their bills.

Don’t Forget Your Customers Are Human And Make Mistakes

If someone usually pays the bill on time but simply forgets, you can offer them a fee waiver one time for their loyalty. This also makes the customer feel like you care about them and understand how hectic their life can be. Particularly now, even a $10 late fee that you waive can make a huge difference for a family struggling to pay the bills and fill the gas tank.

Your kindness can go a long way in these tough times. Believe me, they will remember how understanding you were the next time they need your services.

Consider working out a payment plan if the customer is having financial difficulties. It’s better than having to collect late payments from customers.

The First Step In Collecting Late Payments From Customers

No one likes to have to send out late notices to customers and procrastination looks tempting. But don’t. Immediately send out late notices the day after payment was due. Most of the time, people simply forget and these notices serve as a reminder.

Customers expect these kinds of reminders. Does your credit card send out a reminder if payment is past due? Or your utilities? This is a standard business practice that shouldn’t upset anyone.

The Sound Of Crickets

There are always a few who spoil it for everyone else and make you step it up to the next level. They don’t pay their bills on time, not because of financial hardship, but because they just aren’t concerned.

Try calling them on the phone. It’s easy to throw aside a piece of mail, but if someone calls them, they don’t want to have to constantly screen or dodge phone calls. They just want to take care of the problem.

Just make sure you are polite and professional. You might even suggest that you’re calling to help them out because they’re so busy they surely forgot about the bill. Even if you don’t really believe that it’s a great way to politely encourage action.

If At First You Don’t Exceed, Try Again

Despite all your well-intentioned efforts, you are still having to collect late payments from some customers. As always, you want to be polite. But you also want to be relentless. Unfortunately, you may have to call them every few days. Collecting late payments from customers is just an unavoidable part of doing business.

Get Your Own Virtual Bookkeeper

Collecting payments can be a hassle sending out all those invoices and chasing late payments. Luckily, that’s just one of many features that ServiceWorks offers with their software to help small businesses. We’ll help you every step of the way from a customer lead to collecting those late payments. Try it for free today!