Having decided to offer a customer credit, it is important to ensure that your customers are fully aware of your terms and conditions and particular, what your payment terms are and when payment is expected.
Whatever your payment terms, a lot of customers will take longer to pay and although you know or believe you will get paid, eventually, any delay will have a negative effect on your own cashflow.
If you do have a customer that continues to pay late, speak to them politely and:
- Remind them what the agreed credit terms are.
- Ask why payment is late. (you may be able to offer a solution)
- Explain what affect the delay in making payment is having on your own business and the need for you to pay your own suppliers on time.
- And if necessary, your entitlement to charge interest and late payment compensation.
In our experience, good customers will often wish to retain the working relationship and dealing with late payment in this way will not affect that relationship.
However, you should bear in mind that customers who do not pay their invoices on time may not be as valuable as you first thought and may be in financial difficulties.
If you have chased for payment and if payment has still not arrived, it is important to take action to recover the debt as soon as possible. The longer the debt remains unpaid, the more difficult it will become to collect and more likely it is to turn into a bad debt.
Ultimately, there is no point running a business unless you get paid. No matter how successful you are is in securing orders or increasing profit margins, if you are unable to collect payment from your customers you will run out of cash and ultimately go out of business.
For more information and advice on how to deal with late payment contact firstname.lastname@example.org or telephone on 01489 550480.