When it comes to late paying customers, no single one is alike. Each has a different excuse for not paying, which constantly keeps you on your toes. However, deal with enough late paying customers and you start to see trends. To prepare yourself, get to know the most common types of late paying customers and when you come in contact with one of them, utilize these top tricks to get them paying.
4 Types of Late Paying Customers and How to Handle Them Each
1) Absent-Minded - Do you have those customers that always seem to forget their payment is due? They say they'll get it paid, they say the check is in the mail, and yet it doesn't seem to come. You know they aren't trying to short change you but it does seem like your payment is not on top of their priority list. The trick with these customers is to get atop that list. Don't let them forget you. How? Remind, remind, remind. After the original invoice, if it's a week before the due date and you haven't received payment, send them a reminder letter. Keep it friendly but remember your goal is to make sure they remember to pay. If the due date arrives and there is still no payment, call immediately to check. Once you've contacted them, continue sending reminder letters that get a bit more severe with each letter. Make sure they understand the consequences of forgetting your payment. Check out these sample collection letters to get an idea of how to contact your absent-minded late paying customers.
2) Downtrodden - We're sure you've gotten those phone calls before; the ones where a customer is telling you they've hit a financial hard spot and are needing to wait to get paid from someone else in order to pay you. Frustrating enough, you never expected this customer to be an issue. However, we've all been there before; those moments when your finances don't quite work out how you expect them to. There is hope for these customers. Instead of assuming their cash is lost for forever, or that you'll have to wait months and months before getting paid, be creative in how you can start getting paid ASAP. Implement a payment plan for this customer. Work with them to start sending payments in whatever amount and over whatever time period that doesn't affect your cash flow and that they can commit to. This allows you to receive your entire sum and to also start immediately getting cash. You're doing a huge favor for the customer and they won't forget it.
3) Chronic - Then there are those customers who never seem to pay, who sometimes (if you're lucky) you can get a hold of and without a doubt, you're nervous every time their due date gets closer. Obviously, these people have bad financial habits and it would have been best to avoid doing business with them in the first place. The most effective way to deal with these kinds of problem customers is to prevent them. Use more caution when you extend credit. Pull credit reports on each of your customers so you can get an idea of how they have paid in the past. By being as informed as possible, you can keep yourself from getting involved with those that tend to consistently be late paying customers.
4) M.I.A - What about those customers that just drop off the face of the earth? You send them their invoice and then never hear from them no matter how hard you try. There are times when you must realize the problem is out of your hands. When you can't communicate with a customer at all and their payment is severely past due, call in the professionals. Turn to a reputable collection agency to take care of your late paying customers. Although not ideal, sometimes it is the only way to take care of those customers who have gone a-wall.