Ten Ways to manage late payments
By Peter Rowe, PCG Freelancing Matters

2. Set strict credit limits and keep to them.
You can do this either by setting the limit
to support sales levels (if references are
good enough this should equal twice the
monthly sales figure for that customer),
or set it at the maximum amount your
business is prepared to be owed,
regardless of current sales levels (a
popular calculation is the lower of 10%
net worth or 20% net current assets).

3. Prepare and agree with your customer
unambiguous written contracts and/or
terms and conditions of trading. Legal
advice should always be taken when
preparing terms of trade but the
document should include: the agreed
payment period; interest payable on late
payment; the supplier’s rights with regard
to late payment; terms about the quality
of the goods; a statement claiming
‘retention of title’ in appropriate
circumstances; and a statement of how
queries will be dealt with, including any
appropriate timeframes for raising
queries.

4. Make sure you know and comply with
procedures used by your customers’
buying and accounts departments.

5. Initiate and maintain close contact with
your customers, particularly with the
person responsible for paying your
account. Try to create a rapport, so that
even when money is tight, you are top of
the list to be paid.

6. Review payment records of existing
customers at least twice a year. Do not be
afraid to refuse orders or withdraw credit,
and obtain payment in advance if a customer
has an unacceptable payment record.

7. Ensure that you get a signed delivery note
for goods supplied and always invoice
accurately and on time. Invoices should be
set out logically and clearly, stating the
invoice date, account number, order
number, amount due, the date by which
payment must be made and the preferred
method of payment. Where possible,
provide a breakdown of the amount due,
detailing the exact goods supplied or
services rendered with dates.

8. Check the status of each account before
despatching goods. Do not continue to
supply if the account is overdue and use
your customer’s desire for further supplies
as a spur to payment.

9. Take action to collect late payments by
sending regular reminders and chasing
payment persistently by
telephone/fax/email and, if necessary, by
visiting your customers. In the collection
process you are likely to encounter
customers who either can’t or won’t pay. A
customer who can’t pay may have a genuine
problem and, if this is the case, it may be in
the interests of both parties to negotiate a
settlement – perhaps by introducing a
‘payment plan’. You will need to determine
the cause of the problem and how serious it
is, what is being done to resolve it, what you
can do to help and what assurances can be
offered in return for that help. Where a
customer simply ignores requests for
payment, or makes endless promises to pay
that are not kept, further action should be
taken without delay. You may wish to
impose collection sanctions such as
stopping supply, reviewing the credit limit or
imposing interest under the Late Payment of
Commercial Debts (Interest) Act. If the
situation persists, place the debt in the
hands of a collection agency or solicitor who
specialises in debt collection, or pursue it
through the court. It is your money - do not
be afraid to ask for it.

10. And finally, remember to thank those
customers who do pay on time.