How to Tackle Late Payment Excuses

Heard that phrase before?

Chasing unpaid invoices and listening to late payment excuses is undoubtedly one of the most frustrating parts of working in the debt collection industry. Here are the top 10 late payment excuses how to get around them!

  1. “I have already sent the cheque”

To avoid this situation, always ask your clients to send cheques with recorded delivery.

If a cheque has genuinely been sent and hasn’t arrived, ask your client for the cheque number. Or you can tell your client to cancel the first cheque and send another – first class with recorded delivery.

  1. “I have not been paid by my customer yet” / “I’ll pay you when I get paid”

Some debtors believe they are permitted to withhold payment until their clients have made payments to them. Regardless of your client’s cashflow, you are entitled to be paid in full and on time – and you should not be regarded as less of an urgency.

Agree a deadline with your client and remind them that you are entitled to charge them interest under the Late Payment of Commercial Debts (Interest) Act.

  1. “The director, who signs the cheques, is on away today”

In the absence of a boss, the business should not stop running. Request to speak to a senior member of staff. Perhaps offer alternative payment methods (where helpful) and remind them of possible the interest charges that their boss will not like!

  1. “We haven’t received the invoice”

According to a recent survey by credit control specialist ‘Satago’; 44% of the excuses given to small businesses awaiting payment are along the lines of receiving an invoice late or not receiving one at all.
Call your client before the due date to make sure the invoice has been received. This will give you enough time to send out another invoice (if necessary) before the payment becomes late.

  1. “The invoice seems to be missing”

Clients who are trying to delay payment will often wait until the due date to tell you their invoice has been lost. Try calling a couple of days before the payment is due to ensure everything is in place and to give yourself enough time to re-send an invoice or organise an alternative method of payment. If invoices are frequently being misplaced, consider switching to electronic methods of payment.

  1. Technical Error

This could range from “The computer is down” or “Our accounts system is down” to “I am changing bank accounts” or “I am getting a new cheque book” and so on.
With mobile banking and various different methods of payment available, there is no real technical excuse for not being able to provide payment by the due date. Remind your clients of possible interest charges and encourage them to use a different method of payment such as a CHAPS or BACS payment.
Systems such as ‘PayPal’ can be used electronically via any mobile or computer, independently of the bank account.

  1. “I can’t pay the bill”

If you have pressed for full payment and it is clearly not working, ask your client when they will realistically be able to pay the invoice by. Most clients will suggest needing a week or so. Find out how much money they are short by and ask that they pay what they can on the due date. Ask for the difference to be settled on the date they agreed to pay off the total, reminding them of possible interest charges.
This way you avoid being paid in installments, settling the debt as quickly as possible in two payments.

  1. Disappearing Clients

Unfortunately, some clients will never have intended to pay you in the first place. Here you a have a few options;
For smaller payments, pursue your client through the small claims court or for larger sums consider hiring a debt collection specialist.
You are legally allowed to charge ‘statutory interest’ on late payments, unless you have stated a different rate of interest in your contract. This is 8% plus the Bank of England base rate. You will need to check the current base rate and previous rates. These methods can be costly and time consuming.
The least ideal, but sometimes necessary, is to cut your losses, write off the debt and blacklist the client.

  1. “I thought we had longer to pay!”

Most payments are usually due in either 30, 60 or 90 days. If you require a 30-day turnaround, it is possible some clients will insist they have different terms and therefore take longer to pay.
To cover yourself, clearly state the terms and conditions on your invoices and remind your clients of the interest that could be charged under the Late Payment of Commercial Debts (Interest) Act 1998.

  1. Disputes/ Queries

It is common for customers to withhold payment on the grounds that an invoice is wrong, or because they are unhappy with the goods or services supplied. If they are trying to delay payment, they will often wait until the due date to inform you of their uncertainties.

After sending out the invoice, call your clients to make sure any disputes or queries regarding payment can be answered and settled before the due date.

When faced with late payment excuses, here are some things to remember

  • As a creditor, late payments can affect you greatly. Delays can impact your own cash flow which can quickly cause problems for smaller businesses without significant cash reserves or easy access to temporary finance.
  • Your company is owed this money and you have a right to seek payment.
  • Even if the excuse seems genuine, if an agreed payment deadline has expired, you are entitled to be paid on time and in full, regardless of your client’s cashflow.
  • You are permitted to charge interest.
  • Excuses will often be a means of delaying payment for as long as possible.
  • You should not be treated as less of a priority than other suppliers.
  Written by Elise Doyle www.fjcm.co.uk