When and How to Chase Late Invoices

Since I started my own business, I have written off 2 bad debts.

One was for £20. The other was, I think, £300.

That is it.

So how do I get paid? Here is what I do when a customer has not paid by the Due Date.

When I first get in touch

I contact a customer after he is late paying my bill. When I contact him depends on the time I have given him to pay.

• If I gave him 10 days, I generally contact him about 14 days after the invoice date.
• If I gave him 30 days, I generally contact him 7 days after the due date.

How many times, and how firmly

There is no rule about how often. The generally accepted idea is three contacts.

• The first time, very kindly.
• The second time, more insistent.
• The third time, I let him know legal action will be taken if he persists in not paying me.

And then I really do follow on with the legal action, if it is necessary.

I use common sense with this. If the customer is in good communication with me, I allow him more leniency and work with him to get my invoice paid. If he ignores all my attempts to recover the money, then, by all means, I am as strict as I like.

Stand out from every other reminder

All businesses send payment reminders. So I try to do something different.

In one job, Credit Control was one of my functions. I designed a very simple and crude letterhead with a huge smiley face drawn on it. I photocopied it and used that as my template.

When I needed to send a reminder, I handwrote it on the photocopied template and faxed it to the customer.

It worked very successfully. It brought us more income faster, with fewer Bad Debts.

In another company, we did not have a bad debt problem, but customers did not pay as fast as we wanted. So I devised a discount system: only 2% if they paid before the Due Date.

To my surprise, customers liked it, even though it was only 2%. It was really successful.

In the same company, the staff played a game. Whoever had the highest statistic over the previous week got a cake. When I called customers who were close to the due date, and could still get the 2%, I drew them into our game. I asked them to help me win the cake by paying now!

That worked great!

There are many things like that you can do to speed up your income. Be as creative as you like.

Two more things I have seen

Believe it or not, there are businesses out there with a policy of not paying any bills until the supplier asks for money. So do ask!

And one thing that should be obvious, but is not always: the better the service you provide, the more likely you are to get paid, and to get paid faster. Your customers want to pay you when they are very happy with your service.

I will write more about this another time.

In the meantime, Flourish and Prosper