For small businesses, suffering late payment from customers is a familiar problem. Nicola Roby, from CHW Small Business Bolton Accountants looks at the most common delaying tactics used by customers, and how you can overcome late payment excuses.
Whilst this is a difficult one, you need to determine can their customer make an acceptable immediate part payment? Establish a precise time when your client will be able to pay; can you get post-dated cheques that are dated at intervals acceptable to you?
The oldest trick in the book! Request the cheque number, the location from which it was posted, the precise value and whether it was sent via 1st or 2nd class mail.
Is there a dispute? If there is then the customer may well have good reasons not to pay! You need to establish as a matter of urgency precisely what the dispute it, and how to resolve the situation and secure the payment.
This is another regular excuse! Telephone your client seven days after sending out to confirm receipt, together with any supporting documentation, and checking that all is well with the goods or service provided (remember to make a note of who you talked to, and the time and date and get a call reference).
It’s essential to ensure that your invoicing documentation is correct or you are giving your customer a legitimate reason to delay payment to you. Always ensure that order numbers and client details are accurately quoted, and the invoice is addressed to the correct company. If in any doubt then telephone the person who has given you the order to confirm the necessary details.
Make sure that the invoice is checked before being posted to the client and that it is accurate.
You need to ask – has the business now grind to a complete halt because of this individual’s absence?
Find out if there have been any pre-signed cheques that can be used to make payment or if there is someone authorised to arrange an electronic payment to you via BACS/CHAPS.
Death is tragic but business life goes on.
If the firm was a sole proprietorship then the business has ceased, but sometimes it may continue operating with a surviving relative in effect taking over the reins.
In law, you have a claim on the estate of the deceased, however a tactful telephone call expressing sympathy and querying how the business is to be continued and by whom may be fruitful.
If a partnership, then the partners have ‘joint and several liability’ to the debt and should pay. A respectful wait may well be appropriate. If a limited liability company, then the business should continue trading.
Sometimes this is used as a ‘scam’ to avoid payment. You need to work out precisely how and when this occurred – whether the company/ business in ‘formal insolvency’ such as liquidation, receivership, bankruptcy, IVA etc. If it is you need to find out what firm of insolvency practitioners are dealing with the administration of the case and lodge your claim.
There is a saying in credit management circles that ‘HE WHO SHOUTS LOUDEST GETS PAID FIRST’. This doesn’t help you the small business owner. Speak with your client and explain your terms of payment, request prompt payment and pursue the debt vigorously.
Another frequently used excuse. However, changing bank is a common occurrence and shouldn’t make things grind to a halt.
Establish exactly when any issues be resolved. Request the client pays by credit card or consider setting up a paypal account.
For more advice contact Nicola Roby at CHW Bolton Accountants on 01204 534031 or via our contact us page.
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