Late payment excuses and how to defeat them
From the dog eating the invoice to radio silence, some customers will try a range of tactics to get away with paying you late. So what do you do when it comes to chasing payment? Here are some classic excuses that we’ve heard before and our top tips for working with late-paying customers to make sure you get the money that you’re owed.
1. “The cheque’s in the post!”
OK, it’s probably unlikely that you’re being paid by cheque these days, but the concept of ‘the money’s on its way, honest!’ is universal. And if you find yourself being fobbed off repeatedly without ever receiving payment, you can be pretty certain that the customer is stalling for time.
If the customer says that they’ve paid but you haven’t received any cash, you could start by asking for ‘remittance advice’, which is a letter that a finance department will send to prove your payment has been issued.
If you’re pretty sure no payment has been issued, try offering a more immediate payment option by allowing your customer to pay you online. In FreeAgent, you can add a one-click payment link to your invoice emails using a payment solution from Tyl by NatWest, Stripe or PayPal. If you’re sending your invoices digitally, for example by email, text or WhatsApp, you can share the payment link directly with your customer. They can then pay you online via their debit or credit card - pretty much instantly.
2. “We haven’t used the work yet”
You may hear “we decided to do the work in-house” or “we ended up cancelling the project” as an excuse not to pay. If a customer tries to delay payment (or withhold it altogether) by claiming that they’re not using the work you did for them, then you need to challenge this, and fast. If their plans change once the agreed work has been completed, that’s unfortunate, but you’re completely entitled to be paid for the work that you did for the customer, whether they use it or not.
To prevent situations like this, it’s really important to have a good contract in place before you begin work. The contract should make it clear that the customer is paying for your time and work product, not their ultimate use of the work. You can both agree your expectations for the work in the contract (which should include the work you’ll do, how much it will cost, how long it’s likely to take and when you’re going to invoice for it) and then you’ll have something robust to rely on if customers make excuses like this.
3. “Wait, have we not paid you yet? Actually, I can’t find your invoice - are you sure you sent it? Hang on, let me look through this stack of paperwork…”
The disorganised chronic late payer will usually pay up eventually, but not before those unpaid invoices have drained away your healthy cashflow. By keeping an eye on your aged debtor report in FreeAgent, you can identify customers who frequently pay late. You can also cut down on the time you take to chase chronic late payers by using FreeAgent’s automatic invoice reminder feature - just set it up before you send the invoice, then FreeAgent will do the chasing for you!
Hello? Anybody there? There’s nothing worse than having a customer who just disappears without a trace. They won’t return your emails or calls and you simply can’t get hold of them.
For these customers - some of whom sadly may have had no intention of paying you in the first place - you’ll have to make a choice. You could hire a professional collection agency, or for smaller debts, pursue your customer through the small claims court. Both of these options could be time consuming and may end up costing you money. However, you can charge statutory interest on late paying invoices, which is 8% plus the Bank of England base rate - there’s information about this on gov.uk. Alternatively, you could cut your losses, write off the invoice and simply never work with that customer again.
5. “Money is a little tight right now…”
Any business can go through unforeseen difficulties, so if a customer hasn’t paid yet, it may not mean that they’re not planning to pay at all - it might be that they’re facing short-term cashflow problems.
Even if you think the customer can’t pay, it’s worth having the awkward conversation and picking up the phone to ask when they plan to pay you. If it is just a short-term issue with a good customer, you could maintain a good relationship by offering an extension rather than enforcing late charges. And in the future you can easily check a customer’s creditworthiness using online services which provide free access to credit scores for businesses.