Managing finances is an important part of running a successful business, and collecting payments on time is a cornerstone of good financial health. However, you may find yourself facing the uncomfortable situation of having clients who delay or avoid paying their bills. IBISWorld reported that businesses in the United States have over 30 million debts in collections each year.
These past-due debts can disrupt your cash flow and affect your ability to manage and grow your business. As a business owner, you need to develop effective strategies to encourage clients to clear their past-due bills without harming your professional relationships.
Approach the issue
It is important to approach the subject of overdue payments with tact and professionalism. You must balance firmness with understanding, especially when long-term business relationships are at stake. By employing clear communication and a structured approach, you can navigate these tricky waters and encourage your clients to settle their accounts.
Send a polite reminder
Begin by sending a polite reminder to your client. Sometimes, invoices get lost in a busy person’s inbox or pile of mail. A gentle reminder can nudge the client into action without offending. State the invoice number, the date of the service or product delivery, the amount due and the payment due date that has passed.
Offer payment options
Understand that sometimes clients might struggle with cash flow issues. Offer them a payment plan to pay the invoice in installments. This way, you make it easier for them to pay their bill while still ensuring that you will receive the payment.
Apply late fees
In your initial contract or agreement, include a clause about late fees. Make sure clients are aware of this policy from the start. If a payment is late, apply the late fee as stated in your policy. This can motivate clients to pay on time to avoid additional charges.
Send a statement of account
A statement of account is a document listing all outstanding charges and payments. Sending a regular statement can serve as a formal way to remind clients of what they owe. It provides a clear record of the debt and can often prompt payment where an invoice alone has not.
Getting clients to pay past-due bills requires a mix of diplomacy and strategy. By knowing how to handle unpaid bills, you can effectively manage your receivables. Remember to remain professional and considerate throughout the process to maintain good client relationships and a positive reputation for your business.
However, if the above strategies fail to achieve the desired result, consider consulting with an experienced commercial collections attorney to go over your legal and non-legal options and best next steps.