How do you tackle late payments?

[RPower]

As part of a campaign we're running with Go Cardless on our sister site BusinessZone, we're asking, what tactics do you use to tackle the issue of late payments from other vendors?

We're particularly interested in hearing from those who use direct debit or run subscription based businesses and what you think works.

What do you do?

 

[Lovetts Solicitors]

Good question especially as two thirds of businesses suffer from late payment. We look forward to seeing the responses you get. Good luck!

 

[@aiteoconsulting]

For accounting and advisory firms, while monthly direct debits through GoCardless (which we use) are ideal for regular accounting customers, it is harder to get advisory work paid through this route, as such work may not always be carried out as a recurring engagement.

Our approach is to offer no payment credit terms on advisory work, with amounts falling due as they are billed. This is not unusual in professional services billing. In reality, there may be some settlement delay due to internal accounts payable practices & authorisations, which should be accepted, but otherwise accounts should not be allowed to become significantly overdue and can be followed up courteously and promptly.

In our line of work, customers want to maintain their good reputations, and this is often an effective 'hint area' when following up tardy payments.

 

[RPower]

@aiteoconsulting Great answer, thank you. That's a good point actually, about varying lines of work and reputations. How do you then go about politely following up late payments, i.e. do you send a letter, or follow up with a polite phone call?

 

[Dave J Smith]

This as a sole trader causes loads of problems, generally I do my upmost to get people to pay by bank transfer, don't accept cards at all.

 

[Dave J Smith]

If I do get late payments, I would alway try the good old phone call to prompt the payment, then follow up by letter. Find a polite prompt over the phone usually works.

 

[@aiteoconsulting]

@aiteoconsulting Great answer, thank you. That's a good point actually, about varying lines of work and reputations. How do you then go about politely following up late payments, i.e. do you send a letter, or follow up with a polite phone call?

Usually a call and email(s) to the contact. Escalation to the CEO if necessary - usually not.

 

[The Byre]

I work in a business that works on trust. No contracts, other than those the law requires. A handshake closes the deal. There are only about 50 such businesses in the UK, so we all know one another. If you stiff somebody for the fee, that fact gets spread throughout the industry and you will not even get insurance, let alone credit. You fail to pay, you end your career. Period.

 

[@aiteoconsulting]

How would you not get insurance? Would you be able to elaborate?

 

[Photosofalice]

We follow a series of Steps:
1 - Email "Kind reminder"
2 - Email "kind reminder" Bigger Font
3- Phone Call - Follow up with an email
4 - Phone Call and email again
5- If its past 30 days, we will issue an interest invoice as per our contract terms.
5 - if above Steps have not worked and we are approaching 90 days we will instruct our lawyer to get involved - in which case we have to give 5% of whatever is paid in through his involvement too him

 

[Henry Simons]

Using Go Cardless has dramatically reduced the amount of late payments, always try to push new customers towards this now as makes life much easier all around.

The most effective method I've found is picking up the phone, usually customers have simply 'forgotten' and are often very apologetic

 

[Alex77789]

Thanks, guys)

 

[louds]

I used to work in credit control and I'd send a couple of e-mail reminders, the first being generic. These prompts used to get a lot of accounts settled (some people really do forget or misplace the invoice).
Failing that, they'd get a personal letter with an invoice copy, sent recorded delivery (that way if it went to court we could dismiss the old, "we didn't get it!" excuse). I wouldn't put the letter through the franking machine or use a window. I'd hand write the address and use a plain white envelope. I'd want them to sign for it. Sometimes I'd put a little pen'd smilie face on the outside so it'd seem super personal. I mean, it WAS personal.
From then on in, I'd do a call - even at this stage, there can be reasonable grounds that someone hasn't paid.
NB: always keep rigorous notes on what has been said, dates, copies of recorded delivery slips.
Still not paid? Court. No fuzzling about. Get an agent to do it. You can get the costs back.

I've sued big companies for £50k+ and they never even turned up in court to dispute it. That is really sad because they pay the invoices + the court fees + our fees. What a waste.

When chasing for payment, always stay polite and reasonable, even if it is your own money. You may have to read that audit trail out in court

 

[Cynic]

I used to work in credit control and I'd send a couple of e-mail reminders, the first being generic. These prompts used to get a lot of accounts settled (some people really do forget or misplace the invoice).
Failing that, they'd get a personal letter with an invoice copy, sent recorded delivery (that way if it went to court we could dismiss the old, "we didn't get it!" excuse). I wouldn't put the letter through the franking machine or use a window. I'd hand write the address and use a plain white envelope. I'd want them to sign for it. Sometimes I'd put a little pen'd smilie face on the outside so it'd seem super personal. I mean, it WAS personal.
From then on in, I'd do a call - even at this stage, there can be reasonable grounds that someone hasn't paid.
NB: always keep rigorous notes on what has been said, dates, copies of recorded delivery slips.
Still not paid? Court. No fuzzling about. Get an agent to do it. You can get the costs back.

I've sued big companies for £50k+ and they never even turned up in court to dispute it. That is really sad because they pay the invoices + the court fees + our fees. What a waste.

When chasing for payment, always stay polite and reasonable, even if it is your own money. You may have to read that audit trail out in court

I've got a client right now whose actually 7 months over due. Any idea what fees to add to this ?

 

[RPower]

@Cynic What channels have you gone through (phone, email, etc) and what are you planning next?

 

[Lovetts Solicitors]

@Cynic A lot will depend on the terms of your contract. However assuming you have standard late payment clauses then you'll be entitled to compensation of between £40-£100 per overdue invoice, plus interest of 8% above base rate (so 8.5%).

You also should be entitled to 'reasonable costs of recovery' which will include any legal fees, commission you may have to pay, etc.

We've got a good guide to Late Payment on our website (go to the blog and choose the Late Payment topic to see our articles on this subject) or do feel free to contact us if you want more info.

 

[Mark T Jones]

I'm pleased to see people suggesting the phone - polite conversation (preferable face to face, with phone being a close second) is so much more powerful than letters, emails or court demands.

Early in my career, I did debt collection. We were taught that there were 4 types of debtor

Willing and able
Willing and unable
Unwilling and able
Unwilling & Unable

Remarkably, in our situation about 20% were in the first category - it really did just need a gentle nudge!

 

[Cynic]

@Cynic What channels have you gone through (phone, email, etc) and what are you planning next?

It's actually two separate care home companies. Owner promises to pay every week I ring requesting payment then becomes ghost. The other has a manager and an accountant who've both been recalcitrant in phone/email conversations.

I'm going to send a letter via Fedex to both owners with invoices enclosed.
Then either use

http://www.thomashiggins.com/pages/debt-collection-costs-fees.aspx

@Cynic A lot will depend on the terms of your contract. However assuming you have standard late payment clauses then you'll be entitled to compensation of between £40-£100 per overdue invoice, plus interest of 8% above base rate (so 8.5%).

You also should be entitled to 'reasonable costs of recovery' which will include any legal fees, commission you may have to pay, etc.

We've got a good guide to Late Payment on our website (go to the blog and choose the Late Payment topic to see our articles on this subject) or do feel free to contact us if you want more info.

There is no contract in place ? It's a temp-staffing agency most clients usually pay on time.

So I'm wondering if I should just write this off as a loss or maybe sell it to a debt company ?
Eitherway I'll read through your site and take the next step accordingly.

Thank you once again

 

[Lovetts Solicitors]

It sounds like it's business to business, in which case if there's no contract or clause in the T&Cs to contradict, then the Late Payment of Commercial Debts Act applies automatically, and thus the interest/compensation we mentioned previously should be claimable.

The call as to whether it's worth pursuing the debt or not really comes down to the value of the debt and the risk of a complicated dispute or counterclaim. If it's more than a hundred pound or so and there's no real likelihood of a counterclaim or significant dispute then we'd say it's probably at least worth sending a solicitors letter (our rates start from £1.50 for an letter before action by email)

We find a simple solicitors letter will usually get payment in 80-90% of cases without the need for further action.

 

[vanleasing]

Unless you have a signed agreement that describes your late payment fees then I am not sure what else you can do.

 

[BGD]

We follow a series of Steps:
1 - Email "Kind reminder"
2 - Email "kind reminder" Bigger Font
3- Phone Call - Follow up with an email
4 - Phone Call and email again
5- If its past 30 days, we will issue an interest invoice as per our contract terms.
5 - if above Steps have not worked and we are approaching 90 days we will instruct our lawyer to get involved - in which case we have to give 5% of whatever is paid in through his involvement too him

PhotosofAlice, how do you create an 'interest invoice'? I am aware of the late payments (and calculators) but not familiar with whether to amend current invoice, create new one for full amount (original plus interest) or just a new one for interest? Thanks.

In answer to the OP, until now, increasingly less nonchalant emails, calls to accounts, cc'ing in senior managers and on two occasions: by tweeting them that we were still awaiting payment. In one of these two cases, the long overdue invoice was paid in cash (an ethical investment company, supposedly) into our account within a hour.

 

[Scalloway]

I would just create an invoice for interest.

 

[HazelC]

This is how I run it.

I send an invoice and explain again that payment is required within 14 days, after this time a 10% late fee payment will be added to the invoice. At 7 days I ask them to give their accounts team a gentle nudge as payment is required in one week, 1-2 days before another email goes out to remind them that payment is due today / tomorrow and I really don't want to have to charge the 10% late fee payment as explained in previous emails, on the invoice and in our terms and conditions.

At 15 days 10% is added and a new invoice is created, they have 7 days to pay this invoice before it is passed to my credit controllers. I use @Sam White - that's it, job done

 

[Cynic]

It sounds like it's business to business, in which case if there's no contract or clause in the T&Cs to contradict, then the Late Payment of Commercial Debts Act applies automatically, and thus the interest/compensation we mentioned previously should be claimable.

The call as to whether it's worth pursuing the debt or not really comes down to the value of the debt and the risk of a complicated dispute or counterclaim. If it's more than a hundred pound or so and there's no real likelihood of a counterclaim or significant dispute then we'd say it's probably at least worth sending a solicitors letter (our rates start from £1.50 for an letter before action by email)

We find a simple solicitors letter will usually get payment in 80-90% of cases without the need for further action.

Check your inbox.

 

[Lovetts Solicitors]

@Cynic - thanks, have just replied.

 

[Steve Thornbury]

Some really interesting comments here

 

[raghav116]

Great Info.Thanks to all.

 

[Hireday.com]

My first rule is to address the issue promptly. The longer it goes on, the more likely it is that there will be an issue.

My second rule is from an old saying - "The squeaky wheel gets the grease". If someone is having issues paying invoices, they will likely prioritise the ones that are making the most noise and fuss about it. Be that person.

 

[mick&sarah]

We follow a series of Steps:
1 - Email "Kind reminder"
2 - Email "kind reminder" Bigger Font

Does the bigger font works? How many pay up at step two?

 

[ShirleyM]

We take monthly direct debit payments. Clients who don't want direct debit pay 50% up front, and the balance on completion, which is fairly easy to administer in a service industry. We've had no problems with bad debts or late payments since we started this procedure many years ago.

 

[geester]

We have supplied a Sherriff's office in the USA which is a State body, the terms had been 30 days, it is now 45 and we are told the cheque will be sent out on the 18th July, with it hitting our offices in the UK end of July, so 60 day terms.

Their captain has put another order in and we have declined the order, due to late payment and the account has been put to proforma. If the initial payment is not received in the next 10 days, we will be issuing proceedings on the US government body which in turn will have massive financial consequences to them in the future.

 

[ME Accountants]

I have most of my clients signed up to DD however for new clients when doing work such as year end accounts I tell them I will submit when payment is received. Some clients do not appreciate that but as I have been stung before this way I have to try and protect myself. Very frustrating.

 

[Klarkle]

In my own experience, billing clients asap (ideally immediately) upon completion of the job improves the chances of being paid massively. Not quite a tactic to resolving late payments but it certainly can act as a deterrence.