When you go into business you rarely plan for the times when a customer does not pay you the amount they owe you for the goods or services you have provided. The nasty truth is that you are going to have times when some customers do not pay on time. You are going to have times when you have to remind customers to send you the money they owe you. You are going to have times when you get frustrated by a person’s lack of payment.

There are some things you can learn here, and implement into your business practices so you will be prepared for when one of these times occurs.

Credit Checks are Necessary

The first things you have to learn if you are going to allow customers to pay you in monthly or weekly increments is to check the customer’s credit before you make the agreement.

We all want to trust our fellow man. We want to see only the good in people, and we want to give everyone a fair chance. However, when it comes to your finances you have to be guarded about trusting people. When you check the customer’s credit you will discover if they have a past history of not paying their bills on time. You might find that a person was good at paying in a timely manner and then they began to pay their bills late. In these instances there may have been extenuating circumstances that caused them to pay late for a time and you might want to give them a second chance to redeem themselves and improve their credit rating.

Invoice

You need to have an invoice that clearly tells the customer how much they owe, and the date that their payments are expected to be paid on. If a customer is late with their payment you can send them a copy of the invoice, or you can call them to remind them of their invoice obligation.

Show in detail on the invoice how much extra they will have to pay if they are late with their payment. Companies may give anywhere from 3 to 10 days for a customer to make their payment before it is considered to be late.

If your customer is another business make certain that the invoice you are sending is in compliance with their accounting department. You may need to add a purchase order number, or get special permission from a particular manager before the company will make payment to you. If you are dealing with a company make sure you learn all of these details before you sign the purchase agreement with the customer.

Incentives

You can offer incentives to your customers to make them pay on time. You can offer to reduce the amount of their payments slightly, or reduce the amount of interest they have to pay if they pay their account balance on time each month. Often these incentives cause people to go above and beyond in their efforts to make timely payments.

Calls

If the customer is late take the time to call them and gently remind them of their lack of payment. They may have simply forgotten, or they may be having troubles and be able to explain why they are late.

Send a Letter

You can post a letter to the address of the customer in an attempt to remind them that they have not met their obligation. Include a copy of any associated paperwork such as an invoice.

A Letter Before Action

You generally need to hire a solicitor to help you send a Letter Before Action. These are legal documents that give people one last chance to make good on their debts before they are taken to court.

A letter before action is sent to customers who are extremely late in their payments. This letter will detail the amount that the customer owes, when they agreed to pay that amount, how behind their account is, the amount of charges that have accrued on the account, and the total amount owed.

The letter of action will detail the very last date that you will accept payment before you start the legal proceedings against the person.

Legal Action

If your best efforts to collect monies due to you fail you might have to consider allowing your solicitor to take legal action against the customer.