What To Do When A Client Stops Paying Their Invoices

With times as difficult as they are, a lot of businesses are struggling with late payments. More so than usual. This has put business owners in a difficult position, as they have a right to reclaim the money they’re owed, but they don’t want to hound clients who might be struggling. But there are other things you can do when a client stops paying their invoices, before starting the debt collection process.

Communicate

Never underestimate the power of talking to your customers when it comes to getting paid. Building a rapport with your customers (rather than having a transactional relationship) will not only improve your chances of getting paid on time, but it could actually encourage them to purchase more services from you in the future. Make it a habit to talk to your clients regularly and keep building that relationship beyond the initial purchase.

Offer Early Settlement Discounts

One option to encourage clients to pay not just on time, but early, is by offering early settlement discounts. This is essentially an incentive for customers to pay their invoices before the due date, ensuring you get the money you’re owed within your invoice terms. This might mean you get paid slightly less overall, but it does mean you get paid, and you don’t take a hit to your cashflow to do it.

Have A Stop List

If a client isn’t paying invoices, it stands to reason that they shouldn’t be allowed to benefit from any further services until they have paid for them. This sounds pretty straightforward, but you would be amazed how many businesses will keep supplying services and issuing invoices, even when 1,2 or more invoices are outstanding. Having a ‘stop’ or ‘wait’ list means you can identify which clients should not be provided with any more services until their account has been settled in full. This will help prevent you from losing any more money, and it will often prompt customers to pay their invoices as well.

Charge Interest

Did you know that you’re legally allowed to charge interest on late payments? The standard rate is 8% plus the Bank of England base rate, but if you have it written into your contracts you can charge more. You can also claim compensation of between £40 and £100 per invoice, depending on the value of the invoice itself. Alternatively, you may be entitled to your reasonable recovery costs. A lot of businesses we speak to don’t like to actually apply interest to late invoices, worried that the customer will stop using them.  But even if you don’t apply the charge, reminding customers that you can (and will) can push you ahead in their priority for payment.

Look Internally

If you have clients who are regularly paying late, then it’s important you review your internal processes. Try to see if there are any potential issues that could be contributing to clients paying late, and what you could do to improve things. Are your invoices being sent promptly? Are you speaking with your customers on a regular basis? Do you offer enough payment methods to make it easy for clients to pay?

At Debtcol we specialise in helping business owners recover money they are owed, and then put processes in place to make sure it doesn’t happen again. That includes reviewing your internal policies and providing consultations or collection services. If you would like to know more, please just get in touch with the team today.