Following Up with Late-Paying Clients

Sooner or later, nearly every business owner who issues invoices will encounter a client who is late in paying. In order to maximize your cash flow and safeguard the health of your business, you need to stay on top of these invoices that go past due.

Sixty-five per cent of invoices are uncollectible after 60 days so it's important to act quickly. First, you need some sort of calendar or system that will tell you as invoices are coming up to the deadline.

When the due date passes, send a friendly note and a second invoice with the date highlighted. Re-iterate your payment terms and notify the client if you have added a late payment penalty.

Most clients pay after this second notice. If payment still hasn't arrived, initiate a conversation with the client to find out why. Trust your instincts about whether their intentions are good - in which case you might negotiate revised payment terms - or whether they're stringing you along. We have a client for whom we do periodic collection calls. A quick call to one of their clients uncovered the fact that an invoice had been left unpaid due to confusion over the application of the original deposit. Payment was promptly received.

You may continue with sterner payment reminders and steeper penalties if the payment still doesn't arrive. As a last resort, consider sending the client to a credit agency or take them to small claims court. Thankfully, most payment disputes never go that far.

The key to minimizing losses is to stay on top of your invoice schedule and know when clients might need a friendly nudge from you.