Late and Non-Payment of Debts

The four main reasons for late payment are:

• Inefficiency - common excuses include 'we are going onto computer', 'we are short of staff', and so on. It can be helpful to find out how the invoice approval system works; also, if you get the chance to meet the person responsible for passing the invoices for payment, do so - the fact that they can put a face to the name when they come across your invoices can often speed up the process. Ultimately, you must be tough with these customers, but it might be worth being patient if the problem is short-term rather than endemic.
  
• Dissatisfaction - if the customer has a legitimate unresolved query, then ask for payment of all but the queried amount; you must, however, resolve the query as quickly as possible.
  
• Deliberate policy - there are some companies who set out to take as much credit as possible. Beware those who turn things around and say 'all our suppliers give us 90 days', to try to shift the blame from their policy to yours. If you were to check, you would probably find that 90 days was being taken, but not necessarily agreed. Ideally you should refuse to accept such treatment, although in practice the response must sometimes be tempered by commercial considerations.
  
• Cashflow problems - many companies have a pot of money available each month out of which bills are paid, and which is often less than the total of the bills received. Usually this just means that you have to wait an extra couple of weeks for payment, which often means that your creditors also have to wait in the chain. In extreme cases, you could be dealing with a customer who desperately wants to pay you, but simply has not got the money at the moment. Companies with cashflow problems often use excuses like 'we need a copy invoice' (or delivery note), 'we don't understand the charges', and that old chestnut, 'the cheque is in the post.'

Let us consider some of the more common excuses offered for non-payment, with suggested responses:

The cheque needs a second signature

This is a genuine requirement of some companies, but is used by many others as a delaying tactic. You can check if it's genuine by asking to speak to the signatory - if it is genuine, you will be put through and can plead the urgency of the case first hand, if it is not, then your request will be refused and you will have to question further to find the real reason.

We'll look into it and ring you back

Bet they don't! Always be in charge of calls - use your initiative and offer to ring the customer back at a pre-arranged time, or else say 'if you don't call me, I'll be sure to ring you.' That way, they know you mean business.

The cheque is in the post

Possibly it is, but it's more likely that it isn't. Ask for details - cheque number, amount, date sent, whether it was first or second class, if it was marked for anyone's attention and so on. If it is in the post, then you'll get the information. If it isn't, you should get your cheque promptly and - as a bonus - the excuse probably won't be offered again. If no cheque arrives, call again within days, rather than weeks.

Your invoice is in the computer for payment

If you are prepared to live with this, fine. If you aren't, ask for a manually raised cheque. All companies can do this, although some are less willing than others.

The person you wish to speak to is not available

This could be genuine, but if you find it is happening regularly and you believe you are being stalled, escalate the call. Ask for the managing director or the financial director - no one is too important for you to speak to, and taking this approach shows that you mean business.

That invoice is in query

Ask for full details of the query, the name of the person dealing with it, and payment of the undisputed amount. If the customer digs their heels in, check out the query and see that it is resolved as speedily as possible. Once all obstacles to payment have been removed, you should get your cheque.

Could you send a copy invoice?

A simple and commonly used tactic, and yet one which can prove difficult to handle. If they insist copies are necessary, fax them if possible; write on the invoices 'this is a bona fide copy invoice', sign it and date it. That way if your customer then tries to insist that a fax is not a legal document, you are covered. If you have a customer who habitually asks for copies, consider charging for them; it's not unreasonable, and if this is just a delaying tactic then it will stop. Alternatively, send the copies as a matter of course before making the call; that way you effectively remove the reason for non-payment.

Our payment conditions are...

Faced with this one, check the documentation just in case something was written in; at the end of the day, supplier's terms take precedence anyway, but being sure of your facts will stand you in better stead to negotiate. Check out the customer's payment terms and try to get onto their prompt payment list.

The person who signs the cheques is away from the office

This is often used as an excuse and delaying tactic. Try to determine how long the absence is for and find out if anyone else can sign (speak to them if there is someone). Press for a promise of settlement with a set date for action and call back if nothing is forthcoming (or call back at 9.00 am on the first day the signatory is back in the office, to stress the urgency of the situation). Ultimately it is illegal for a company to continue to trade when they cannot carry out their business properly; consider speaking to a director if you are getting nowhere fast.

We are changing banks

This can cause delays but is normally quite straightforward. Confirm the balance outstanding and take details of the new bank - suggest they apply for an emergency chequebook, if they don't have one already, or suggest that they use another method of payment; there is no reason why changing banks should stop payments being made.

We are going through a re-organisation (or take-over)

Take an interest and show concern, that way you'll get more information about what's going on. Offer to call (or to have a sales person call) when the changes are complete - and go for full settlement; they should be able at least to raise a manual cheque.

Do you want my business or not?

This is a particularly nasty form of blackmail, especially when used against a small businessperson by a larger concern. The best way to deal with this sort of comment is not to rise to the bait but to say, 'of course we want your business, Mr Smith, you are a valued customer; but payment of the account within the terms agreed is all part of a business transaction. Extended credit has to be paid for by someone and it would be a shame to see it reflected in the customer tariff. Prompt payment enables customers to benefit from competitive prices and this would be affected if customers were to take unofficial extended credit.'

We can't really say when it will be paid

If the customer is completely evasive then it is up to you to try to establish the real reason for non-payment. If the problem is a shortage of cash, then that is not just the customer's problem, it is your problem too. Make that clear and then move on to see how you can work together to sort things out and find a solution. If you decide to go for timed instalments, be specific about amounts and due dates. Be sure to monitor the situation and keep track of your customer's financial position.

The cheque is received but with no signature

Make a call to acknowledge receipt of the cheque and bear in mind that it could have been an oversight, but press hard for agreement on the date of receipt of the signed or replacement cheque.