You never expect clients’ invoices to go past due, but unless you take 100% of your payments up front (most businesses don’t), then sooner or later you will come a cross a slow paying client.
What’s the best way to handle the situation, once you find yourself faced with it?
Cash is king 👑
Most businesses provide a product or service and then expect to be paid afterward. That might be immediately or it may be up to 30 days later. These payment expectations are usually set at the beginning of the customer relationship.
But humans don’t always do what they say they’ll do, even when it’s legally binding.
While it may seem quite dry and procedural to issue an invoice and get paid, it’s really a very emotional transaction. Money works like a point system that runs deeper than pounds and pennys. So when we don’t get the points we’ve earned, we often take it personally. Once that happens, customer relations can get messy.
So the first step to resolving a payment issue is to try to take the emotions out of the equation. Look at what’s going on from a logical and procedural standpoint. Treat it like you would a bank reconciliation. What are the facts of the situation? What is the cause of the problem? Is the customer simply short on cash at the moment? Is the customer traveling and it slipped her mind? Is there another reasonable explanation that has nothing to do with you?
This simple step can get you grounded so you are able to see what is really going on without causing additional problems for yourself and jeopardizing an otherwise profitable relationship.
What Does it Mean?
Whether there’s a logical cause easily remedied, or the issue runs deeper, when a client is not paying you it’s a message. And as with all communication, we need to interpret its meaning as accurately as possible.
Initially, our tendency is to play the blame game and assume that the problem lies solely with the customer. But there may be something amiss with our own procedures, often related to communication as well. For instance, if you send emailed invoices, are you sure that the client even received it? (QuickBooks Online and other web-based accounting software can track when the client has opened or viewed your invoice.) Email is not 100% reliable. You may be assuming the worst when the solution is simply to re-send the invoice.
How has the communication been between you and your client overall? Is he happy with the work you’ve been doing? Do you know? Slow payment can be a sign that the client is unhappy, but is not telling you about it. Yep, that’s a communication issue too!
Be sure to take action quickly
One of the biggest mistakes you can make when you have a slow-paying client is to ignore the situation. Yes, it may feel uncomfortable to speak up. That’s the emotional thing again. Resolve not to take it personally just yet. Remember that you are running a business. So be of service to your customer and take the initiative to communicate and get to the root of the issue, if there is one.
If you wait, yes, the customer may eventually pay and the tension may go away for the moment. But if it becomes a habit, the longer you wait, the worse the problem will become. This makes it easy for resentment to grow. Resentment destroys win-win relationships.
Some simple actions you can take quickly (and with a positive spirit) include…
- Re-send the invoice and/or issue an account statement. Include a gentle note that the invoice is now past due (this process can be automated, and you can lessen any client embarrassment by noting at the top that it’s an automated message)
- Pick up the phone and call the customer to check in and make sure everything is okay. Find out if he has any questions or if something needs to be resolved. The client may be holding back because he just needs clarification on something, but hasn’t had the chance to ask you yet.
- Make it easier for your clients to pay you. Start accepting online bank payments or card payments if you don’t already. If you do, mention it to your customer as an option. Don’t assume that she already knows it’s available.
The guiding principle here is to take positive, proactive action to communicate! Assume the best. Think long-term and try to resolve any underlying issues so the problem doesn’t return.