How To Handle Slow-Paying Customers: The Best Tips To Get Paid

Ways Of Improving Your Invoicing Process & Getting Paid Faster

Handling slow-paying customers can be stressful, especially when you rely on consistent cash flow to keep your business running smoothly. Fortunately, by understanding the reasons behind delayed payments and applying strategic steps, you can improve the situation and get paid on time. Interested in learning more details? Keep reading!

Bill Payment Trends In The U.S. & What They Mean For Your Business

Before diving into strategies for dealing with slow payers, it’s important to understand how Americans generally handle their bill payments. Many consumers delay payments for various reasons, and businesses need to be aware of common payment habits to adjust their collection practices effectively. Some typical bill-paying habits include:

A large percentage of bills are paid online, making digital platforms a common method.

• A significant number of consumers pay their bills through ACH transfers, while credit card payments have also increased in popularity.
• Many customers choose to pay directly through the business’s website, taking advantage of the convenience of this option.
• Recurring payments are increasingly popular, with many consumers opting to automate their bill payments to avoid missed deadlines.
• Older generations, particularly seniors, still prefer traditional payment methods like regular mail and checks.
• Millennials are shifting away from paper methods, with many opting to pay bills through their bank websites or other digital platforms.

Understanding these habits can help you tailor your collection methods. For example, if you’re dealing with overdue accounts, working with a business debt collection agency can assist you in recovering payments and maintaining healthy cash flow.

Reasons Why You Might Have Slow-Paying Customers

Identifying the root causes of slow payments is the first step toward resolving the issue. Here are some common reasons why customers may delay payments:

You Did Not Complete Your Setup

If your business setup isn’t complete or clear, customers may be confused about payment expectations. An unclear setup can lead to missed invoices or delays in processing.

Your Invoice Packet Is Incomplete

An incomplete invoice packet, missing crucial information like payment methods or account numbers, can cause delays. Ensure that all necessary details are included in each invoice to avoid confusion and speed up payment processing. If issues persist, working with an international commercial collections agency might be a step to consider for recovering overdue payments.

Your Agreement Lists Payment Information That You Overlooked

If your original agreement lacks clear payment terms, customers might not fully understand when or how to make payments. Always make sure the payment terms are included in the agreement and are clear from the start.

Your Slow-Paying Customer Might Be Under Financial Stress

Sometimes, customers delay payments because they are facing financial difficulties. In these cases, your business might need to be flexible and explore payment plans or alternative solutions.

Tips On How To Collect From Slow-Paying Customers

Once you understand the reasons behind slow payments, it’s time to take proactive measures to ensure you get paid promptly. Here are some expanded, practical tips to help you collect payments more effectively:

1) Start By Reviewing Payment History

A deep dive into the customer’s payment history is the first step toward determining how to handle a slow-paying client. Look for patterns in their past payments. Do they frequently miss deadlines or only make partial payments? This will help you assess if the delay is a one-off or a recurring issue. 

It will also give you insight into whether you should offer a grace period or whether stricter measures need to be applied. By identifying trends early, you can adjust your collection approach, potentially preventing future delays.

2) Create a Clear Contract

A well-crafted contract is essential for preventing misunderstandings that could lead to slow payments. Be sure to include specific payment terms such as the exact due date, methods of payment accepted, and details about late fees or interest charges for overdue payments. Also, outline any penalties or service suspensions that might apply if payments are delayed.

This transparency sets clear expectations from the outset and encourages customers to respect your terms. A clear contract also helps protect your legal rights if you need to escalate the issue later on. For example, if a customer continually misses payments, you might consider enlisting the help of a B2B commercial collections agency to recover your funds efficiently.

3) Immediately Send An Invoice

The timing of sending an invoice can make a significant difference in the payment speed. The longer you wait to send the invoice after delivering the product or service, the more likely it is that the customer will forget or procrastinate. 

Send an invoice immediately after the transaction is complete. This will keep the payment fresh in the customer’s mind and help them plan for the upcoming payment. Moreover, an immediate invoice conveys professionalism and helps ensure that you are following up as soon as possible.

4) Clearly Communicate Due Dates & Late Penalties

It’s important that your customers understand exactly when payments are due and what the consequences are for failing to meet the deadline. Include a clear payment due date on every invoice and reinforce this detail in your communication. 

Along with due dates, state the late penalties or interest charges that will be applied if payment is not received on time. Providing this information upfront can help deter late payments by making the consequences clear. Having this information in writing also acts as a reminder that payments are a serious matter.

5) Send a Due Date Reminder

Before the payment due date, send a friendly reminder to the customer. This can be an email or a simple message, politely reminding them of the upcoming deadline. Many customers simply forget or overlook due dates, so a reminder can prompt them to take action and ensure the payment is processed on time. 

Some businesses choose to send a reminder a few days before the due date, while others opt for one reminder a week before the due date. Tailor this strategy based on your customers’ habits and the relationship you maintain with them.

6) Offer Early Payment Incentives

If you find that some customers respond well to incentives, consider offering early payment discounts. These incentives encourage clients to pay before the due date, speeding up the payment process and improving your cash flow. For instance, you could offer a 2-5% discount if the customer pays within a specified time frame (e.g., within 10 days). 

While this may reduce the total amount you receive, it can ultimately help you avoid having to chase after overdue payments and keep your operations running smoothly.

7) Ask for Deposits For Advance Payments

For larger projects or high-ticket items, it’s a good idea to ask for a deposit upfront. A deposit ensures you have some cash in hand before you complete the service or deliver the product. This method also protects your business in case the customer defaults on the remaining balance.

Typically, deposits range from 20% to 50% of the total cost, depending on the size and scope of the project. Requesting deposits can help you maintain cash flow and reduce the likelihood of customers avoiding payment after the work is completed. 

If you’re having trouble with late payments, consider working with a commercial debt collection agency to help manage overdue balances!

8) Lower Credit Limits Or Place Holds On Delinquent Accounts

If a customer has consistently missed payments or is significantly behind, consider taking more assertive actions. One way to deal with this is by lowering their credit limit or placing a hold on their account. Lowering the credit limit prevents them from continuing to purchase goods or services on credit until their outstanding payments are cleared. 

Placing a hold can restrict them from placing further orders until they settle their account. This tactic can be very effective in motivating customers to pay their overdue balances to regain access to your services.

9) Ask For a Promissory NoteFor Past Due Items

When a customer’s account is overdue by a significant amount, it may be necessary to formalize the repayment arrangement. Request that they sign a promissory note, agreeing to repay the outstanding amount over a specific period.

This legally binding document clearly defines the terms of repayment, including the amount owed, the payment schedule, and the consequences of failing to meet those terms. A promissory note acts as a strong reminder to the customer that they are legally obligated to pay, which can motivate them to settle the debt promptly.

10) Hire a Collection Agency

If all else fails, hiring a commercial collections agency like us might be your best option. A professional agency specializes in recovering overdue payments and can devote the time and resources necessary to follow up with slow-paying customers. 

Hiring a collection agency can save you time and effort, allowing you to focus on your core business activities. Agencies can provide more aggressive strategies, and may even help you recover funds from international customers. While there may be a fee for their services, it can be worth the cost if it helps recover a significant portion of your outstanding balances.

Take Action To Resolve Slow Payments & Get Paid On Time

Dealing with slow-paying customers can be frustrating, but with the right strategies in place, you can manage your collections process and maintain a steady cash flow. If overdue accounts are weighing you down, consider reaching out to a trusted commercial collections agency that specializes in recovering payments.

Mesa Revenue Partners is here to help you recover what you’re owed so you can keep your business growing. Don’t let late payments disrupt your operations. Contact us today!