No one likes to deal with a client that owes you money. It’s unfortunate to say but it’s bad business, especially if they’re giving you the runaround. We’ll get the clients that are past due and are super easy to get on it (we love you). But from time to time you’ll get those who are just very bad at managing their finances. Here’s how to get clients to pay when they’re past due.
Don’t forget to join our newsletter to be notified when a new post is published!
Emails & Phone Calls
Emails and phone calls are going to be the main from of contact when reaching out to a client regarding their past due invoices. Let’s break down how you can motivate them to get on it!
Remind Your Clients Of Their Terms
This strategy is mainly for clients that are being difficult. Most clients tend to get on it as soon as you remind them once. For that client that gives you the runaround it is best to remind them of their terms whether it be COD, Net15, or Net30. It is important that you remind the client that these terms are an agreement by which they are to follow. These rules apply to either B2B or B2C (business to business or business to consumer).
Tip: Be transparent about your policies. Advise that terms are usually earned, otherwise move the client to COD terms (cash on delivery or due on receipt) to ensure they pay you upfront or prior to completion of a service or delivery of a product.
Follow Up Directly With The Past Due Invoice
Another great strategy to get clients to pay when they’re past due is to follow up directly with the past due invoice. Attach the past due invoice to the email instead of simply advising AP they are past due. This allows you to directly hand them a copy of evident information regarding a service or product.
Tip: Include a copy of the initial purchase order along with the past due invoice. What you’re doing here is attaching evidence with evidence. You’re making a statement that the consumer placed an order and now it’s time to pay.
Send Weekly Open Balance Reports
When a client is past due, send weekly open balance reports. An open balance report will reflect all past due invoices. If you use QuickBooks you understand how awesome this report is. This is effective because it details when the invoice was due, how long it’s past due, it shows the balance, and purchase order number. An open balance report also reflects the net amount open, not just the amount due. This can give the client a heads up to upcoming due dates.
Tip: When you send an open balance report make sure to copy someone who’s in charge. You might be sending this over to AP but copy the client directly or the owner if you have to so they get involved.
- During initial contact using an OBR, ask AP or the client if there’s anything on the report they are missing. Chances are they could have potentially missed something.
- Try sending an OBR along with each individual invoice.
- Ask what more you can do to help them help ‘us’ get paid. This shows your willingness to partner up and accomplish a task as a team.
- Call them and advise you will be sending an open balance report within ‘x’ amount of time (don’t forget that customer experience).
Collect A Credit Card To Keep On File
Collecting a credit card to keep on file is especially helpful if you have decided to move the client to COD terms. It is also a good way of running charges once terms are up. Reach out to your client and come into an agreement. If you don’t have a credit card authorization form for your company get in contact with us to see how we can customize one just for you!
Tip: You can always charge a credit card fee on past due payments and waive it on timely payments.
Ask For Internal Help To Collect Past Due Payments From Clients
A great tactic is to get more than one person in the payment collecting process involved. Get an account manager or someone else in accounting that’s in your team to follow up in order to get clients to pay when they’re past due. This gives a clear message more than one person in your company understands the situation at hand. The client could either feel intimidated, embarrassed, or motivated to get it done.
Tip: CC more than one person on the emails. Make this a goal more than one person can now help achieve.
What If All Fails? I’ve Tried Everything!
If you’re in the category where you’ve done all this already but nothing seems to work, don’t worry. This strategy is a sure way to close your entire balance and get your client to pay all past due invoices.
Get Clients To Pay When They’re Past Due By Putting Orders On Hold
That’s right, put orders on hold. If your client has a project in-house use it as leverage. Advise you cannot process or ship the order until all past due invoices have been closed. It’s an aggressive strategy that works, believe me.
It’s something we certainly do not wish we’d have to do but desperate times call for desperate measures. There’s absolutely no way why you should be chasing for your money, especially once you have completed the service or provided the product. Do what you have to do in order to collect your reward. Get your client to pay when they’re past due.
What If I Don’t Currently Have Any Business From My Client?
GET SOMETHING!!! But be cooool about it. Follow up and request new business, fish it out. The strategy involves having leverage over the situation at hand. The client owes you money, and there’s a deadline coming up. Follow through with the project, keep that customer experience up, and hit them with the hold. You’d never expect they actually had the funds to pay you!
How Will Requesting Past Due Payments Affect The Relationship With My Client?
Clients understand what they’re doing. Often times they’re simply not prioritizing you or your business’s needs. Although it may be outright careless and even disrespectful, we must learn to separate personal from business.
If a client gets upset by the fact that you’re on top of your money when they’ve failed to pay several months after the due date then they weren’t a true partner to begin with. Real partners who respect their associates don’t avoid confrontation when it comes past due payments. A true partner wouldn’t put themselves in that situation in the first place.
Advise: If you lose a client due to lack of cooperation to get paid they never deserved you.
In some cases the client could just be facing financial problems due to poor financial management skills. They’re not all looking for what’s in their best interest, some genuinely feel terrible. Only you know your clients which means only you truly understand how much you can take.
Why Don’t Clients Pay On Time?
So what’s the reasoning behind why some clients just don’t pay on time? Often times:
- Clients don’t have the funds due to poor financial management skills
- They’re waiting to get paid first
- They don’t understand how to cope with stress / they’re overwhelmed
- Clients are disorganized
- They’re dealing with a genuine dispute
- Dishonesty can play a role
- Some clients have no regard for their vendors or suppliers
When to cut ties
Unfortunately, cutting ties with a client is something you might experience in the years of running your business. And although this is the last thing you want to go through, it’s something we must touch base on.
Our company had a client who always paid late. However, we were able to collect funds using the strategies provided on this article. But then something happened.
We received a legal letter notifying us that the company was closing down and they would be liquidating assets to cover any money owed to all of their open accounts.
So, we filed a suit. Unfortunately, the client was so squeezed that in reality they weren’t able to cover anything they owed. The partners walked out scott free having failed their partners and employees alike.
This is as close as it really comes to cutting ties. My suggestion to you is that if you’re facing a client that is past due, change their terms to COD, or due on receipt. Have them pay upon purchase or completion of a project in order to avoid losing money in a possible scenario such as ours.
Franknez.com Wants To Know Your Experience
We would love to hear about your experiences collecting from a client that was past due. Did you use any of the strategies mentioned on this blog or did you do something a little different? It’s safe to say our readers are curious to read more about your personal experiences to better learn how we can all take the necessary actions to get clients to pay when they’re past due. Comment on the comments section below, we’d love to hear from you.
If you haven’t subscribed to our newsletter just yet don’t forget to do so! We post valuable content our readers can certainly benefit from. We love to help our readers become confident when dealing with their personal finances and when setting goals to grow their business(es).