It provides them the opportunity to contact you ahead of time should making an on-time payment become an issue It gives your customers ample time to prepare their finances On your customer’s end, your contracts should include detailed information regarding the cost of their purchase, the deadline for repayment, and any potential penalties they may incur for missing this due date. This is especially important for service-based companies who provide value that’s often a bit more intangible in nature. On your end, this means defining in clear detail what products or services you’ll be delivering. When it comes to business agreements, there should be no question as to what each party is responsible for, and when they need to provide it. So, while it’s impossible to eliminate late payments altogether, you should certainly try to minimise the issue as best you can. This adds up to two weeks per year - time that could be better spent improving and growing as a business. In fact, many companies spend as much as one day per week chasing overdue invoices. Not only do these customers put a halt to your cashflow, but chasing them down can lead to a tonne of wasted time, money and energy. Obviously, having delinquent clients isn’t good for your business. How to reduce the number of clients not paying their invoice While you don’t have complete control, here, there are a few things you can do to help your clients out in this regard - which we’ll come back to in a bit. On the client’s end, operational friction and other obstacles may lead to late payments on open invoices. Even if they’re aware of the due date, they’ll have little reason to pay up if you never send them a bill. On your end, failure to deliver an invoice as planned makes it impossible for your client to pay you. Sometimes, the issue may be of a more logistical nature. Thinking of the “big picture”, you’ll want to keep track of all disputes made - and make improvements to your operations as needed. In dealing with singular disputes, the task ahead will be to prove that you’d provided exactly what you’d promised the client - and that they need be held responsible for payment in full. (And, unfortunately, there'll always be those who'll raise disputes regardless of the quality of your work.) If your product or service doesn’t live up to your client’s expectations, they’re probably not going to feel compelled to pay you.Įven if you feel that you’ve held up your end of the bargain, the potential for a dispute to occur is ever present. The client is dissatisfied with product or service In other words, if even the possibility of future financial hardship rears its ugly head, clients may become increasingly hesitant to pay their invoice in full.Īs we’ll discuss, you’ll likely need to work with such clients to figure out a way for them to repay you without placing too much of a financial burden on their organisation. Obviously, the customer isn’t going to pay up if they literally don’t have the money to do so.īut, a report from Tally Street suggests that even financial uncertainty can cause clients to neglect their open invoices for the time being. The client is experiencing financial hardship or uncertaintyĪs mentioned above, financial challenges on the client’s end can often cause them to be late with their expected payments. Now, let’s take a quick look at the three main reasons a client may fail to pay their invoice. It'll also allow you to put safeguards in place to avoid similar issues in the future. For one, knowing why a customer was late will allow you to take the optimal approach when attempting to recoup the funds earned. Common reasons why clients don't pay invoicesĪgain, there are a number of potential reasons for a client to miss a payment or invoice deadline.Īnd it’s crucial that you understand the reason behind each late payment instance you encounter. That said, we’re going to discuss what to do when a client doesn’t pay their invoice - and how you can maximise the chances of getting paid on time in the future. Late payments can bring your cashflow to a halt, leading to financial problems for your business. Unfortunately, this doesn’t always happen. On top of generating conversions and increasing sales, maintaining positive cashflow also means collecting the funds owed to you on time and as expected. For business owners, staying cashflow positive is always a top priority.
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