How to deal with late payments
Cash flow and accounting

How to deal with late payments

When it comes to managing your finances, you need to know that you have a reliable source of funding. For example, if you have late payments from clients or customers, this can be a huge problem for any business owner. In this article we'll give some advice on what steps to take if you are facing late invoice payments.

How to ask for payment from a late client

If a client is late to pay, it's important to be patient, calm and respectful. Sending angry emails or making threats may seem like the quickest way to get your money, but it can actually have the opposite effect. If you act professional and understanding, you'll be more likely to get paid on time — and the next time around.

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Here are some tips for how to ask for payment from a late client:

  • Keep a record of all communications with your client. If they're late with their payment, send them another friendly reminder email that includes all of your previous correspondence on this matter. This will show them that you've been working hard to resolve this issue and will also give you ammunition should they choose not to pay.
  • Be polite but firm in your communication style. Be polite and professional in your tone when asking for payment from clients who are late on payments. This will help maintain good relationships with these clients moving forward and prevent further problems down the road. You can even offer incentives or discounts if they pay early!
  • Never threaten legal action unless it's absolutely necessary — this could actually backfire on you if your client decides to fight back or file bankruptcy (which would delay their payment even further).

Calling a client is one of the best ways to ensure that a client pays you. This can be especially effective if you've already sent an email since it shows that you're not giving up on getting paid. The best script is generally one of politeness and friendliness:

"Hi! This is [your name], calling from [company]. I was just wondering if we could chat about the payment for [service/item]. Can I ask what your current plans for payment are?" "I see! Great! Thanks so much for letting me know; let me get back in touch with my team and figure out our next steps from here. We really appreciate having heard from you today! Take care!"

How to write a late payment email

When chasing an overdue invoice, emailing a client can be the best non-aggressive approach, especially with clients that may have simply forgotten.

As with calling, be polite and friendly. You want to ensure the recipient knows you're still hoping for a positive outcome, so don't go overboard with threats or aggression in your message. A simple "we haven't received payment yet" should do the trick without being overly pushy or aggressive. Here’s an example of an email chasing up a late payment from a client:

Hi [Name], I'm writing to follow up on our conversation from yesterday. I'm sorry if this is an inconvenient time to discuss, but I wanted to make sure that you received the invoice and were able to review it. As discussed, please let me know if there are any issues with the amount, or if there's anything else that I can do for you at this time. Thanks in advance, [Your Name]

Invoice finance: for when clients won't pay

When dealing with delayed payments, you can also consider different forms of invoice finance for unpaid invoices. One form of invoice finance is invoice factoring, which is when you let a bank or other financial institution buy your invoices for cash. Another type of invoice finance is closer to a business line of credit, where a company lends money against unpaid invoices.

Why should businesses use invoice finance?

There are many reasons why this option could benefit businesses:

  • Allows you to access funds when needed immediately rather than having them tied up in receivables
  • Allows businesses more flexibility with their cash flow because they aren't waiting until their bills are paid before receiving new funds
  • Create an accounts receivable automation process

One of the easiest things you can do to lessen your time on late payments is creating an accounts receivable automation process. This includes setting up automated reminders and follow-ups and automatic email reminders to be sent out when payments are overdue.

Disclaimer: always refer to professional advice. The information presented here is purely indicative and not intended as advice. Always consult a legal or finance professional.

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