What should you do if your customers don’t pay you on time? For a business to remain successful, it needs cash flow. How do you maintain good cash flow? Well your customers need to be paying you on time and on a consistent basis. Without that, your cash on hand dries up, which can be debilitating for a small or medium business. So consider these four steps to make your customers pay you in full, and on time.

Step 1: Get ahead of the problem

Set up systems

This can be done by setting up late-payment protocol in your business. Start by sending the account the next day. Make sure the payment terms are clearly laid out. If it hasn’t been paid that day, follow up shortly after, with a friendly call reminder by “checking” that they received their invoice. This process can even be automated with certain CRM (customer relationship manager) tools.

Clarify agreements

Make sure your customer understands the terms up front and if they are uncomfortable with them, then ensure you hash out the agreement before you deliver. Some companies offer incentives for early payments, like a small fee reduction (if you do this make sure it’s built into you price, so you don’t run into a loss.)

Step 2: Follow up on late payments

Friendly reminders

Most of the time, gentle reminders will do the trick and get invoices paid. These can be in writing either weekly or bi-monthly. Anything after a month and you’re entitled to become a little annoying.

Consult internally

Make sure that within your operation, the left hand knows what the right hand is doing. This means tracking accounts and payments and filling in the relevant staff. This can be done with a good accounting system that will flag late payments and keep you up to date. Remember it’s not ideal if a customer has already made payment but still receives a call about it.

Keep your cool

You provided a service or product and are well within your rights to claim payment. That said, you also have a relationship to manage so (as aggravating as it is) you need to keep your cool with late-paying customers. This may be due to a number of issues including a misunderstanding around your invoice. So, remain professional at all times, albeit persistent.

Step 3: Push the issue

Now it’s been a good while and you still haven’t been paid. Either your client has forgotten, or they’re avoiding you. The further the delay; the less chance you have of seeing your fee.

Make a call

It’s much easier to ignore an email than an actual person. So, get on the phone and have some voice time with your client. Be persistent and make sure you get the correct person on the line, clarify the terms and be both professional and firm.

Ask about the hold up

See if you can get the customer to be honest with you about why the delay is happening. It will help you understand if there was a problem with your service or product or if they are having financial issues themselves.

Negotiate terms

Now that you understand what the problem is, you can decide if there is anything you can do to fix it. Like negotiate a payment plan or offer a discount.

Step 4: It’s tough decision time

Don’t deliver

Withholding work is a tactic you can take with caution. The downside of this scenario is that your customer may refuse to pay if you haven’t delivered in full yet.


There are legal options you can take if you can’t get your client to pay and you have tried everything in your power to make that happen. In this case you need to weigh up what the cost and time of legal avenues is worth to you. Also make sure the customer has the money to pay, for example if you are a B2B supplier and you find your customer in foreclosing or has dire financial issues, they may not have anything to pay you in any case.

Learn from this

At the end of the day it, assess the risk and loss because it may be cheaper to right off the loss and proceed directly back to Step 1 to avoid this same problem repeating with other clients in the future.  

The bottom line

On time payments contribute positively to a business’s cash flow, empowering you, the business owner with cash on hand to grow. But all too often this is a slippery slope because when you rely on customers to pay after receipt the goods, you rely on their word and predictability, often putting your cash flow at risk. When they fail to pay, and you have exhausted all your options you can always get a quick cash advance as bridging finance which will help you alleviate the stress of large late payments. For more information contact Merchant Capital. 

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