7 Steps to Minimizing Your Slow-Paying Client List

Posted on May 12, 2015 in Business Transactions

In today’s turbulent economy, a slow-paying client can generate more anxiety and frustration for your company than a no-paying client. At least with a no-pay, you know what you need to do (sue) and the steps you need to take. Not that you look forward to it, of course, but at least you know . . . and that certainty can bring some relief.

A slow-paying client is like a fickle lover: first prepared to abide by his (or her) commitments to you; then dashing your hopes by standing you up for your romantic rendezvous. Did you do something to upset him? Does he want to see you again? Does he intend to leave you? When he needed you, he called every day; now that you need him for something, he can’t be reached. You want to believe the excuses he gives you . . . but should you? Because we don’t know (and he’s certainly not being communicative), we can be thrown into a state of panic from the uncertainty.

Thankfully, clients differ from lovers in one significant way: you can put your foot down and set your ground rules for working with you from the outset. By following these 7 preventive steps, you can minimize the receivables from slow-payers:

  1. Start with a written agreement. Have a written contract with your clients that spells out what you’ll do for them, what you expect to get paid, and when. Include a “stop work” clause if you provide services or ship products on an ongoing basis. Better yet, include penalties for lateness. Your clients should know up front that you will charge interest and/or late fees if they don’t pay on time. Yes, times are tough, but it’s not your responsibility to provide them with interest-free loans.
  2. Send invoices right away. Invoices get paid more timely when the value of the work you’ve done is fresh in your client’s mind. Not six months later when you’re a distant memory. In some situations, you may want to send your invoice at the beginning of the month (in advance of providing services), rather than after you’ve done the work or shipped the product.
  3. Implement an “upcoming reminder” system. Companies used to follow up with clients at 30 days, 60 days, and 90 days. In this economy, don’t wait. You can call or send a friendly reminder at Day 15, thanking them for their business and checking on their satisfaction with your product or service. Ask if you can expect payment by the due date. Let them know you’ll be in touch if you haven’t heard from them on Day 30 – and don’t just say it. Do it.
  4. Tackle receivables immediately once the deadline has passed. Once clients have passed your deadline without payment, give them a call within 48 hours to one week. The more (and sooner) you’re in front of clients to get paid, the less they can ignore you.
  5. Enlist help from others. Paradoxically, money can be one of the most uncomfortable subjects for entrepreneurs (especially women business owners) to discuss with their clients. If this is not your strong suit, have an assistant or other friend/relative who can act in a professional manner make the calls for you. With greater emotional distance from the situation, they will have greater ease confronting this potentially awkward situation.
  6. Consider alternative payment arrangements. If you can’t get a check for 100% right now, think about the alternatives. Although credit card payments will cost you the processing fees, they may provide breathing room that some of your clients need if they’re looking for a “float.” Offer to work out a payment schedule (this can be a good time to introduce interest payments, if you haven’t done so already). Some customers may appreciate discounts for invoices paid before the due date – but be sure they don’t take the discount and pay you late.
  7. Keep detailed notes on promises made and agreements reached with your clients. If you contact a client on Day 31 who promises you that “the check will be in the mail once the bookkeeper comes in next Friday,” check with the client on the following Monday to confirm the amount of the check and the check number. Send written confirmation to the client of what she promised to do. The more details you have on record, the harder it is for clients to wiggle out of their previous promises. (And the better the paper trail you’ll have if you need to eventually sue).

Whatever you choose to do, create a system that you can implement easily, monitor consistently, and handle timely. That way, you’ll be sure to avoid the agony of the slow-paying client.

To get the latest posts delivered right to your inbox, enter your email in the box below:

back to top