Most small business owners will agree that chasing for payment is among the most frustrating aspects of entrepreneurship. Yes, asking for money is totally awwwkward!
On the other hand, friendly connections and reliable business networks are invaluable. So, how do you remain on good terms with your customers when you have to ask them for payment?
Keep calm and learn how to manage getting paid on time. Chaser is here to help with a few tips that will benefit your business.
Chasing for payment
What does chasing a payment actually mean? Well, nobody wants to work for free! And clients' late payments create cash flow problems which is bad news for your business!
As a business owner or manager, you simply have to chase payment because you need to follow up with your clients until they pay you. It sounds like a bore, but there are some key strategies involved in chasing overdue invoices in a way that will bring the best results.
The guide below offers eight tips on managing your debtors:
1. Supportive business relationships
Be friendly and pleasant in all your daily interactions with everyone, especially clients. Food relationships are not to be taken for granted in business (or in life). When your clients value the business relationship they have with you, they will be more inclined to pay you on time.
2. Scheduling
Set a schedule for payment reminders according to your invoice payment terms. Timetabling is one way of making the process polite, without making it feel too personal.
3. Agree to terms
Set your payment terms from the very beginning. This might be difficult to do early on in a new business relationship, but it's far better to get this uncomfortable discussion out of the way as soon as you can. When everyone's on the same page regarding payment there's less chance of misunderstandings later on.
It's a wise idea to have your clients sign an agreement that clearly states your payment terms - your credit control policy document. This gives you a written record to go back to at a later stage (if it comes to it). It's also helpful to remind your clients of the terms they agree to when you sent out payment reminders.
When you set your terms, you might want to include late payment interest. Charing interest on commercial debt can be a great motivator for getting payments done and you're within your rights to charge it. If you do decide to add interest, then it's even more critical that your clients are aware of your terms early on.
4. Be systematic
Follow a set format for chasing up late payments. Create a system or policy, that will work for your business and the clients you deal with.
Maintaining the same series of steps for each late payer keeps things professional and reduces the stress of the situation. It also means that you'll treat each late payer in the same, standard way so the process will feel less personal.
5. Accurate invoicing
Get your invoices done correctly the first time you send them. Accuracy prevents confusion and unnecessary back and forth. Your invoices should also be sent on time and to the right person.
Pay attention to how you structure your invoices making sure they contain all the information your clients will need to make the payment. Be flexible and tailor your invoices to your client's payment requirements.
Additionally, when you're sure that you're made the payment process as simple as possible for the client you get an added sense of confidence. Knowing that their non-payment is not due to any oversight on your part equips you to deal with the situation.
6. Customer convenience
Set up payment methods that are as convenient as possible. That way clients will have no excuse for an overdue invoice. Make payment options simple and accessible.
7. Keep calm
It can be very upsetting when someone doesn't pay for the work your business has done for them. Remaining calm and polite is not easy, but it's essential.
Remember, the goal is to negotiate payment and maintain a worthwhile business relationship. You don't want to go in guns blazing and shoot down any possibility of future business with that particular client, especially if there was a simple misunderstanding. The better you handle your non-payers, the better your reputation will be in the long run.
8. Credit control software
Using the right software solutions can be a real game-changer for your business. Take all the above points and tie them up into one efficient, time-and-money-saving bundle. That's what you get when you invest in credit control software.
Optimising your business software can really help you. For example, Chaser's software lets you set scheduled payment reminds. When polite reminders go out consistently you have much less to worry about. This can save you in the region of 15 hours per week on your credit control tasks.
When you integrate credit control software with your accounting software, you can even include an online payment portal on your reminders. This gives your clients the option of making payments directly off the reminder. It also keeps things accurate by automatically reconciling payment transactions for you.
Chase payment politely
Most of the time an email reminder is all that's needed. People do forget and things do get overlooked sometimes.
How do you chase a payment?
An initial payment reminder is best sent in a simple, but polite email. If you don't receive a response, send a second reminder. You can decide how many payment reminder emails you want to send, and how far apart the reminders should be. Generally, three email reminders are sufficient..
If your emails prove unsuccessful it's time to move to an over-the-phone conversation.
If you are unsure about the steps to follow, the Small Business Commissioner has some useful advice.
What do you say when chasing payment?
The tone of your emails should always be friendly and polite, but the tone should get stronger with each email you send. It can be quite tricky to write up something that sounds professional, friendly, polite and firm all at the same time. If you're having trouble, you can find some great email templates here.
Here are the key details you'll want to include when you put a payment reminder email together:
- Use the client's name and ask after their well-being (we're keeping it friendly, remember)
- Include invoice details - amount outstanding, invoice number, and due date
- Remind them of the payment terms they agreed to (use in the second or third reminder)
- Offer your assistance with any payment-related questions
If your email reminders haven't done the trick, it's time to make a phone call. No one likes making these phone calls, but it's more direct and effective. Plus, it's harder to dodge phone calls.
How do you politely ask for payment?
Explain the facts politely (as always), without apologising. Restate the information that you provided in the email reminders, don't get impatient, be calm and helpful.
A good tactic is to ask direct questions, such as 'When can I expect to receive the payment?' or 'Is there anything else I can do to help things along?' If you can, try and get your client to give you a payment date. When a client promises to pay you on a certain day it adds more obligation to them, and it provides a further basis for chasing.
If you don't come right with emails and phone calls, you'll need to send a formal late payment warning and possibly take matters further with legal action.
Chasing for payment takes a lot of time and admin. Time and admin that could be better spent focusing on your business goals or providing better service.
If you're drowning in overdue invoices, then it's time to ask for help. Outsourcing might be just the right thing for your business. Chaser specialises in unpaid invoices, offering efficiency and getting results. After all, the whole point is for your business to get the money owed without losing clients or damaging relationships.
Outsourcing your credit control with Chaser means that an experienced team will handle the uncomfortable aspects of client interactions. You also save money because you won't have to hire an in-house credit controller, and you improve your business's cash flow.
Our small business checklist
Here's a point by point summary of the strategies mentioned above. You can use this as a guide to help you work out an approach that will suit your business.
This is your checklist to get paid on time:
- Maintain friendly professional relationships
- Set a payment reminder schedule
- Payment terms - set them early!
- Be systematic and follow the same steps when chasing for payment
- Create accurate invoices
- Remember to stay calm
- Invest in credit control software
- Get help by outsourcing your credit control
Getting paid
According to the Prompt Payment Code, providing timely payment is an ethical responsibility, not just to help small businesses flourish, but to support the economy as a whole (source).
What happens when a client is late to the payment party? It's time to start chasing. Remember, the way you handle chasing for payment could determine the success or failure of your business.
Chaser can help you save time, money, and relationships so why not book a demo? Your business bank account will thank you.
