Cracking Credit Control
(Not so) Breaking News…not all customers pay on time!
After years of working with small business owners, I know that credit control is one of those tasks you really don’t like doing. That switching between the good guy delivering a great service to that less-friendly guy chasing for payment can feel awkward.
If you’re facing late payers, below are some tips on how to approach chasing for payment whilst maintaining your customer relationship.
Firstly, however, I’d like to share 5 very simple tips on the issuing of your invoice. Invoicing your clients is business basics 101, right? Maybe. But if you’re new to business or new to working in your own small business, sending invoices out with the right tone from the outset is vital.
Send your invoices as PDF documents
Send as a stand-alone email – keep your financial discussions with them separate to your work/service delivery conversations.
Be concise and professional – irrespective of how your emails to your client are normally worded (you may incredibly friendly with them); keep the wording on your invoice email professional and to the point, e.g.
Dear Jo,
Please find attached your invoice for Stage 1 as per our agreement.
If you have any queries, please let me know.
Kind regards,
Provide evidence, or at least have it ready – if you bill them by the hour, have your timesheet ready to send on request. If you are recharging for expenses, have the receipts readily available and don’t be offended if they ask for them!
Clearly state the due date/payment terms on your invoice.
If your invoice goes passed its due date, chasing on due date+1 may not be advisable. Of course, you are entitled to be paid on time! However, consider that your customer – like you – is busy and they are unlikely to be able to just drop everything to pay an invoice as soon as at comes in. They may have their own working processes to follow to keep them organised or a bookkeeper who comes in once a month. Be realistic. Chasing a 1-day overdue invoice, unless you have a specific agreement that payment will be made on a set day, may be damaging. I would suggest giving them a bit more time before you start chasing.
Now you’ve decided to chase…here’s how:
Send chaser emails by forwarding on the original invoice email – it may seem passive and easy to add a line to the bottom of another email to your customer along the lines of ‘Also, I notice I’ve not had payment…’, but this can be very easily missed.
Professional and concise wording – similar to your initial invoice email, the tone of chasing payment emails should be professional and to the point, without being aggressive. Using example from above, try something like:
Dear Jo,
I’m following up on my email below of X date with my invoice for Stage 1 payment as I’ve not received payment for this as yet. Payment was due on Y date.
Can you please let me know when payment will be made?
Kind regards
Don’t apologise – this can be tricky if you know there is something going on your clients’ lives, but irrespective of this, you are entitled to be paid. ‘Sorry to bother you with this but could you…’ is not strong enough. Acknowledge their situation: ‘I’m aware you are having challenges at the moment, however this invoice is now 3 weeks overdue…’ shows you are not insensitive to their issues, but you’re not about to allow your invoice to be ignored.
Ramp up the pressure incrementally – there can be many reasons your invoice hasn’t been paid on time – often, the simplest answer is true, they simply forgot. So, don’t go into your first chaser email with aggression or accusation, it will ruin your relationship. Start with the gentle reminder, exampled above. If no response/payment; follow-up within a week with stronger wording, before moving onto a specific phone call.
Phone calls – if you’re on a call with your customer, say to them ‘before we finish up, I notice I’ve not received payment on my last invoice’. Different to tagging a line on the end of an email – it’s hard for them to miss this when you’re in conversation. Assuming they don’t have a problem with your invoice, they’ll likely tell you payment will be made. Immediately follow this up with an email, sending the original invoice with some wording like, ‘thanks for confirming payment will be made to this invoice when we spoke just now, for ease, I’m resending so you have the invoice to hand.’
Phones call part 2 – if, after a couple of email chasers, you’ve had no payment or response, then a specific call to your client to ask for payment will be required. No one likes this, but it is effective. Again, remain polite and professional – I’ve worked with dozens of businesses and late payments are more often than not oversights or invoices stuck in systems – particularly if you’re invoicing a larger organisation.
Stay on top of this –it’s very easy to ignore this and hope late-payers will just pay! If you find you have a handful of customers who are not paying on time, stay on top of this – set aside time each week or 2 to keep on top of your credit control.
There may come a stage where you get nowhere. Your customer is now ignoring emails and calls and you have no alternative but to take further action. Sadly, this can happen. If you get to this stage – issue your client with a 7-day warning (ideally by email and post), advising that if no payment is received within 7 days of the date of the email/letter, legal action will be taken.
Depending on the size of the debt and where your business is based will depend on how you can legally go about trying to recover this debt. Appointing a debt collector will take care of the all the paperwork but may cost you more (particularly if the debt is not repaid). You can chase debts yourself. For current guidance on how to do this, see https://www.gov.uk/make-court-claim-for-money which covers England and has links to the Scottish and Northern Irish processes.
