HELP!!! My customers are reeeeaallly slow with their payments!

[Fürgefutár.hu]

We sell bus parts to small and medium sized bus operators throughout the UK. We are a small 2 man operation with a turnover of around £200,000 per year. I am running in to serious problems with payments from my customers, I am endlessly chasing them, I spend aproximately 1 full 8 hour day per week sending dunning letters, calling them on the phone, sending out statements, re-sending invoices (that they supposedly never received) confirming when they are going to make the payment, confirming they have all the invoices then following them up when the payment doesn't hit.

If it was a few customers that were stalling on payments we could deal with it, but it's every single one of them (aproximately 50) that stall, and stall, and stall again with payments on overdue invoices.

Putting them on stop has some effect, but 90% of the time they just buy the part from another source. In some cases with a few of the worst offenders we have had to issue county court judgements, which has inturn soiled the relationship completely... To be honest all of them are so late that I could issue county court judgements on the lot... but then we would have no customers left.

Anyone with advice on how to improve things would be great!!! Has anyone experienced the same issue and carried out some sort of program to improve things that has worked? Let me know.

 

[JDX_John]

Do you have decent credit?

Can you offer discounts for prompt payments, might that help?

 

[Dan_Kesher]

We used to have a similar issue. So we switched them all onto Direct Debit.

We started slowly by offering them a discount if they switched to direct debit. Then forced the rest of the worst ones to switch.

Take a look at these guys: http://www.fastpayltd.co.uk/

Hope that helps.

 

[GRDCredit]

Wow - there is a lot there. Someone would charge good money to advise you on a credit control policy!

DD option is probably not going to work for you as I assume all monthly amounts will differ each and every month

My immediate reaction would - of course - be that if you are struggling with this very important part of the business, you should outsource. You should not be spending one day per week on credit control for 50 customers

Have you a written down credit policy? i.e. what are your payment terms, when do you chase, when do they go on stop, how often do you issue invoices, do you issue statements

You need to be building relationships with the accounts payable department in the business you are working with.

Whereabouts in the country are you based? Actually, judging by your user name are you in the UK?!

 

[Dan_Kesher]

GRD, just to clarify, Direct Debit can change each month.
You simply provide FastPayLtd with a list of invoices and they collect the correct payments.

 

[GRDCredit]

GRD, just to clarify, Direct Debit can change each month.
You simply provide FastPayLtd with a list of invoices and they collect the correct payments.

Sorry - I probably was not clear. If you are selling an item - as the OP is - there is no reason why direct debit cannot be used and from a suppliers point of view this would be ideal. However, customers are historically not so keen presumably due to the chance of money being deducted from the account which may be in dispute etc

 

[luvbusiness]

Is this a sign that his/her customers are having problems at their end with cashflow so trying to keep hold of there cash for as long as possible?

 

slow payers are the blight of the small business ,it drives me nuts chasing payment all the time

 

[dave1928]

If its as much trouble as you say, i'd be changing them all onto DD payments or better still, pay at time of order.

Or....the ones that are late paying last order, make them pay before sending goods on next.

 

[Signify_1]

Do your customer re-order from you every so often? For the worst offenders I would require them to make a substantial deposit before taking orders, if your customers would rather take their business elswhere then let them go. Are they worth the hassle of default of payment? Your energy is probably better spent getting new customers that will not take as long to pay you.

 

[termsandconditions]

There's probably not one aspect of your credit management strategy that needs to change but several. For example, do you..:

1.. ..supply under your customers' Purchase Orders or do you have your own Request to Supply client documentation appended to your own terms and conditions?

2. ..assess each client's credit-worthiness and average debtor days after getting them to complete a Credit Account Application linked to your own terms?

3. ..offer a prompt payment discount as others have suggested?

4. ..charge late payment interest when invoices fall overdue?

5. ..have a structured process to chasing clients that preserves the relationship where at all possible?

6. ..have business terms and conditions that are designed to help prevent late payments, can be leveraged in step 5. (above) and give you real options in the face of non-payers?

7. ..have terms and conditions whereby your clients indemnify you against the costs of legal action and third party debt collection which allows you to outsource this aspect where necessary at little/no cost?

Best Regards

 

[KateCB]

You could consider using a factoring company? Effectively you sell your customers debt to the factoring co, they pay you within 48 hours, and your customer pays them; and they are responsible for any chasing.

You send a letter to all your customers telling them that in order to improve your service to them, (i.e. 8 hours spent on business rather than chasing payments!) you have now passed all accounts and payment matters to XYZ factoring and that their payment must now be made to XYZ factoring, account No sort code etc and of course end by thanking them for their valued business.....

There are lots of them, as it helps cash flow for businesses who offer credit terms; the HSBC bank have their own credit factoring dept, so maybe your bank can help here too?

 

[Fürgefutár.hu]

Guys, thanks a lot for your responses, really, there is a lot of useful advice there which I will put into action.

1. We have T's & C's signed by all our customer's which allows us to invoice interest, this had completely dropped off my radar.

2. I agree, we need to work on building a relationship with accounts payable in each of our customers company's.

3. Also agree that I can drop the really slow payers and spend time saved on finding new customers... no brainer really.

4. Direct Debit idea, yes, I really liked this, we already pay a number of suppliers on this basis and I will investigate tomorrow.

5. We looked at invoice factoring and but would be worried about this leading to customers thinking we had cash flow issues.

Thanks again everyone, much appreciate all the feedback!!!!!!!

 

[Jet Virtual]

I have to agree with Kesher. Direct Debit is the best way to make sure clients pay on time. Nowadays it is a lot easier to get set up and it saves so much hassle!

 

[PayVector]

Pretty much every company nowadays has a business credit or debit card. Get a merchant account and have them register a card with you. Each time they make a purchase you re-run the card details with the new amount.

We have loads of companies that do this. We also run what is called payByLink. This is were you enter the invoice details into the virtual terminal and it creates a link specific to that invoice that you can put straight into your invoices. Once clicked it will bring you to the payment gateway to key card details and pay the invoice. Very simple but very effective for this type of thing.

 

[sooraj]

You have to collect security deposit from your customers before full fill their orders and get half money of their order before delivering the order.

 

[Toby1968]

You have to collect security deposit from your customers before full fill their orders and get half money of their order before delivering the order.

...and when this is done kiss goodbye to your business!!

 

[ready2mix]

HSBC wont factor invoices under £250,000 or if your in construction, just had this confirmed today.

Most of the OP customers are prob in same boat waiting for payments too.

I think if you offer discount % that is higher than the current overdraft level you might have some luck?

Bibby finance do invoice factoring.

 

[termsandconditions]

Pretty much every company nowadays has a business credit or debit card. Get a merchant account and have them register a card with you. Each time they make a purchase you re-run the card details with the new amount.

We have loads of companies that do this. We also run what is called payByLink. This is were you enter the invoice details into the virtual terminal and it creates a link specific to that invoice that you can put straight into your invoices. Once clicked it will bring you to the payment gateway to key card details and pay the invoice. Very simple but very effective for this type of thing.

If I may be so bold, can I ask what is the average value of your credit card transactions using this method?

Perhaps Furgef can also let us know his average transaction value to see if it's a viable means of securing payments on time for him.

Best Regards

 

[Hayley_Cbb]

Hi,

We seem to run into the same problem at the end of the month too!

I think the best options are to either switch to a finance company who will do all the running about for you?

However we offer customers early settlement discounts; see below

Discount​

Discount​

Discount​

Discount​

1-7 days​

8-14 Days​

15-28 days​

29 + days​

​

​

​

​

7.50%​

5%​

2.50%​

Nil​

The above explains that if they pay a certain amount of days from date of invoice they will recieve a credit of the relevant percentage.

This has helped us a lot.

Hope this helps

H xx

 

[ThePublisher]

Hi,

We seem to run into the same problem at the end of the month too!

I think the best options are to either switch to a finance company who will do all the running about for you?

However we offer customers early settlement discounts; see below

Discount
Discount
Discount
Discount
1-7 days
8-14 Days
15-28 days
29 + days
7.50%
5%
2.50%
Nil​

The above explains that if they pay a certain amount of days from date of invoice they will recieve a credit of the relevant percentage.

This has helped us a lot.

Hope this helps

H xx

Do you get the cheeky so and so's that take 29 days to pay and still deduct 7.5% though?