How to Deal With Late Payments

Not everyone pays on time.

In the middle of COVID, I was missing thousands of dollars in payment from a client because they upgraded their system and the international payment process didn’t seem to be working. Days went by, then weeks, then months… finally, about three months later, I got paid.

It was maddening. Since a large amount of my pre-COVID clients were in travel-related businesses, I saw a serious reduction in work. That meant that the late payments from an otherwise reliable client that I’ve worked with for years was that much more stressful.

But, honestly, that’s the reality of doing business. People pay late and, honestly, it’s to be expected. But it can make working for yourself a real challenge. So, how do you deal with late payments? This is my personal method:

Make Sure Your Clients Know Your Payment Terms

Your payment terms are what defines how you’re paid.

Most people use net-30 payment terms, I tend to gear towards net-14. That means I require payment within 30 days, not 14. Because I work with smaller businesses that have easier protocols for issuing payments, this is reasonable. But it might be an issue for larger businesses.

The first step in my late payment process happens before the payment is late. I make sure to clearly go over payment terms and HOW I can be paid before I start working with a client. If your clients don’t know when they need to pay you, you could very easily end up with late payments.

Follow-up

Things get lost all the time, it’s just the nature of business. So, often times when payments are late it’s simply a matter of checking in with the client and reminding them that there is an outstanding payment. I find that many times it’s cleaned up within the next day or two.

It’s important to be firm but pleasant in this scenario. Getting paid late sucks, but it does happen and most times it’s completely accidental. It’s not that people are being shady, they’ve simply misplaced the invoice or completely forgot.

If you continue to not see the payment, I start to follow up more frequently.

Figure Out What is Causing the Delay

It’s important to work with your client and figure out what’s causing the delay.

Is there an unavoidable issue? Is something wrong with the invoice? Is there something that needs to be discussed or fixed?

A delay is usually caused by something and taking the time to work that out with your client can go a long way. Maybe there’s an issue with a way they usually pay that can be resolved by an alternative means of payment.

Seek External Help

Honestly, I’ve never used external help to secure payment from a client. It’s an absolute last resort for me. But in cases where you’re facing large amounts of payment that are overdue and you’re not keen on keeping the client around, it could be a good option.

Seeking external help usually means from a lawyer that can issue a demand letter. Or you could talk to a company that specializes in collecting late payments.

It’s important to remember that while you absolutely deserve payment on time, these are definitely relationship-ending strategies. So, proceed with caution but the decision is squarely on your shoulders.

Plan For It

My best advice is to play for late payments because they will happen. With that in mind, I usually think of them in one of two ways. If the late payment is from a new client, it usually means the end of a relationship. However, most of my late payments have happened with otherwise reliable clients and I tend to consider them a fluke.

What do you do when you face late payments? Share your thoughts in the comments below!

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