Excuses, excuses… one of the most frustrating aspects of chasing unpaid invoices is dealing with the reasons some customers give for paying late. When you have worked in the debt collection industry for as long as we have, you will have heard some imaginative late payment excuses – along with some that are so old they were probably being used in Roman times.
The key thing to remember when faced with late payment excuses is this – your company is owed the money and you have every right to seek payment. Even when the explanations provided by the client appear to be genuine, if an agreed payment deadline has expired, you are entitled to be paid on time and in full.
In many cases, excuses will simply be a means of delaying payment for as long as possible. The frustration for you as a creditor is that delays impact your own cashflow and can quickly cause difficulties for small businesses without significant cash reserves or access to easy temporary finance. Here is a breakdown of the four main types of excuse you will hear, and what you can say and do to overcome them.
This is by far the most common type of excuse for late payment you will hear, and covers things like:
- Your invoice never arrived;
- Our accounts system is down;
- The cheque must have got lost in the post.
The key to handling these types of excuse is to build redundancy into your credit control arrangements.
Do you call your customer to confirm the invoice has been received and is free of query before the invoice due date? This way, if your invoice mysteriously disappears or the client has a query, you can easily reissue the invoice or resolve the query before the payment due date.
If your customer’s cheques are always getting lost, consider providing different payment options. Make it easy for your client to pay by BACS, bank transfer, or even PayPal.
Electronic payments are generally faster, provide near-instant access to the funds and help you avoid the classic ‘lost cheque’ scenario. And by allowing different payment options, if there is a genuine system error come the invoice due date, you can always push for payment using an alternative method.
Clients will sometimes claim they cannot pay you because they have not received payment from a client of their own. They may even say they have had to pay another supplier first.
Regardless of their cashflow, you are entitled to be paid in full and on time – and you should certainly not be treated as less of a priority than other suppliers.
If you suspect this is merely an excuse to delay payment, then be prepared to take a firm line with your client. Ensure they are aware of their failure to make payment as agreed and be prepared to invoke your rights to additional late payment penalties under UK legislation.
Some unscrupulous businesses delay payments to everyone to artificially inflate their available cashflow with interest-free “loans” taken from their supplier’s payments. Make sure your customers know that you won’t take late payment lying down and any loan they take from your funds will not be interest-free.
If you suspect that a customer has genuine cashflow issues that are likely to be a regular or recurring problem, then you need to take steps to alleviate the issue. Consider securing full or part payment in advance or agree a staged payment arrangement to lessen the impact on your own cashflow. If your client can’t or won’t agree to this then consider increasing your prices to reflect the extended credit and make sure your customer is aware that the reason for the increase is their repeated late payment.
It is common for customers to withhold payment on the grounds that an invoice is wrong, or if they are unhappy with the goods or services supplied.
Good communication with clients is key so issues like these can be flagged up early and acted upon. As with the Systems Error advice, make a habit of contacting clients after an invoice has been sent to confirm if everything is ok. If there has been a mistake with the invoice, you can correct well in advance of the payment due date.
If your client is unhappy with the services or goods you have provided, then early contact will give you the time to rectify any issues or agree another solution and still get paid promptly. It goes without saying that if your client has a query or issue then it is best to keep written records of any discussion or resolution, as you will need these in the event that no payment is made.
These types of excuse range from the banal – the person who authorises payments is off sick or on holiday – to the catastrophic, such as fire or floods or a senior decision maker passing away.
For the former, ask if anyone else at the company can sign off or otherwise authorise your payment, even if it is just a one off. At very least, ask for an expected return date so you can follow up on your unpaid invoice in a timely manner.
For the more serious scenarios, be sensitive and diplomatic, but try to ascertain the facts. In the event of a death or serious illness, be humane and consider the known facts about the company, if it is a partnership or sole trader, a death or serious illness may have a devastating impact on the ability of the business to stay afloat and you should be mindful of this in any pursuit of payment.
Fire, flood or other acts of God may also make it impossible for a customer to continue trading in the short to medium term. Again, stay in regular contact and ask what steps are being taken in regard to continuation of the business. In both of the above scenarios recovering full payment may be impossible, so risk reduction is the key to avoiding a bad debt. Don’t be averse to accepting small on account payments as every penny received reduces your risk.
And remember, if all else fails, you can get help to recover your unpaid invoices.