Dealing with persistent late payment is one of the more onerous parts of being a business owner - but it is one that must be dealt with quickly and efficiently.
In most cases, payment delays are caused by one of two reasons: either the customer genuinely can't afford to pay you yet, or they're trying to stall in the hopes that you'll forget about the invoice altogether.
Of course, it's not always easy to tell which category your debtor falls into, but here are a few telltale signs that can help you determine if a debtor is stalling. By identifying these signs early on, you can save yourself time and money down the road.
In this blog post, we will discuss four ways to tell if your customer is delaying payment on purpose.
What would a debtor deliberately stall payment?
There are a number of reasons why a debtor might choose to stall payment. They may be in genuine financial difficulty, in which case working out a payment plan may be the best option. Or, they may be trying to take advantage of your business by taking advantage of your credit terms.
The sad fact is that some debtors will make a deliberate decision to stall payment, or repeatedly dispute your invoice, in the hope that you will give up trying to collect the debt and write it off.
This is particularly true if they think you are a smaller business with limited resources.
If your debtor is stalling, it's important to try and get to the bottom of the issue as quickly as possible. The longer you wait, the greater the chance that you'll never see that money at all.
1. Assess whether this is a pattern, or a one-off situation
One of the easiest ways to tell if a customer is stalling is to assess their payment history. If this is the first time they've been late on a payment, it's likely that there are extenuating circumstances (e.g., they're going through a tough time financially).
However, if this is a pattern of behaviour, it's more likely that they're trying to stall.
Having access to detailed payment data, like that stored in the Chaser Hub, allows you to quickly and easily see whether a customer is habitually late on their payments.
If this is the first time the customer has been late on a payment, there's a good chance they're just going through a tough time financially. In this case, open communication is critical to resolving the situation.
If this is a one-off situation, reach out to your customer and explain that you're willing to work with them, but need to know when they expect to be able to make the payment. You can offer them a payment plan or extended terms if necessary.
On the other hand, if you see that the customer is habitually late on payments, it's more likely that they're deliberately trying to stall. In this case, you'll need to be firm in your collections efforts.
If you're unsure of the exact situation, you can always run a credit check on the customer. This will give you a better idea of their financial situation and whether or not they're simply stalling rather than in genuine financial difficulty.
2. Engage in conversation with your customers
As we've mentioned in previous articles on avoiding bad debt, communication is key when it comes to collections. If you're not sure whether or not a customer is stalling, have a conversation with them about their current financial situation and what you can do to help them make timely payments.
Oftentimes, customers are simply unaware of the hardship that late payments can cause for small businesses. By having an open and honest conversation, you can work together to find a solution that works for both parties involved.
We realise that having these kinds of conversations is difficult, and not everyone is comfortable doing so. However, it's important to remember that your customer is more likely to be cooperative if they feel like you're working with them, rather than against them.
To help out, we've put together a few templates, for email, SMS, and phone calls, to get the conversation started.
While having outstanding invoices is frustrating, it's important to always remain professional when chasing up payment.
If your customer is genuinely experiencing financial difficulties, building a rapport and working together towards a solution is the best way to get paid, and maintain a good relationship with your customer.
On the other hand, a sudden and complete communication blackout is usually a sign that the debtor has no intention of paying and is trying to stall for time.
3. Have them suggest a solution/come up with a payment plan
If your customer is genuinely in financial difficulty then they may not have the full amount to pay you, but should be able to offer a solution or at least a payment plan.
Moreover, given an opportunity to resolve the situation, most people will be honest about their ability to pay.
If the debtor refuses to engage in any kind of discussion about payment, it’s likely they are just trying to stall for time. In this case, you may need to take more aggressive action to get paid.
If you're able to get in touch with your debtor, try putting the ball in their court by having them suggest a solution.
If they are truly struggling to come up with the money, they should be willing to work out a payment plan. Work with them to come up with an amount that is fair and realistic, given their current financial situation.
If the debtor refuses to engage in any kind of discussion about payment or offers no solutions, it’s likely they are just trying to stall for time. In this case, you may need to take more aggressive action to get paid.
In either case, it's important that you keep records of all your correspondence so that you can document your attempts to collect payment.
If payment has not been made according to the plan, escalate to a debt collection agency
If you've exhausted all the other options at your disposal, it might be time to consider using a debt collection agency.
Doing this will help ensure that you get paid what you're owed in a timely manner, and it will also protect your business from future issues with the customer by establishing that you are more than happy to take appropriate measures to collect payment.
Many businesses are worried about the potential damage to their reputation that could come from using a debt collection agency, but the truth is that if you're not being paid, your reputation is already suffering.
What's more, taking action to collect payment shows other customers that you're serious about getting paid for your work, and it establishes a precedent that late payments will not be tolerated.
There are also alternatives to outdated debt collection agencies' usual harassing and aggressive tactics. Chaser's experienced debt collections team uses mediation and negotiation techniques to get the best results for our clients.
We fully understand the value of strong customer relationships, which is why we work hard to get our clients paid without damaging those relationships.
Through open communication and offering a range of payment options, we can help you get paid what you're owed quickly and efficiently, without resorting to threats.
Our aim is to always get you paid, without damaging the relationships you've built with your customers.
If you're struggling to get paid by a customer, it's important to take action as soon as possible. The longer you wait, the harder it becomes to collect payment.
To find out more about how we could help you, book a free consultation with one of our payment experts today.
Making sure you get paid on time
Late payments are prevalent enough in the UK to be a problem without some debtors taking advantage of the situation.
The good news is that most late payments are the result of a genuine oversight or an honest mistake, rather than malicious intent, and the debtor in question is usually entirely happy to find a way to resolve their debt.
However, there are a small minority of cases where debtors deliberately withhold payment in the hope that you'll give up and go away.
Unfortunately, these cases can be difficult to resolve without taking more stringent and forceful action.
Differentiating between a debtor who is genuinely unable to pay and one who is deliberately withholding payment can be difficult, but the guide above should give you a good idea of where to start.
If you have any other questions or concerns about debt collection, please don't hesitate to get in touch with us. We're always happy to help!
