late payers

[shirepro]

Ideas appreciated:

I am plagued by otherwise good customers who never pay invoices on time, and when they are chased claim never to have received the invoice, and ask for copies. I don't disbelieve them, I think they are just careless with the invoices. We know they had them, as they are in the same envelope as the cover letter with the goods. I end up spending time chasing them. Our terms are 28 days, which I think is generous and recognises they are large businesses with long chains to get payment authoirsed and made.

I did think about putting a postcard in the envelope for larger invoices that they put in the post acknowleging receipt, or emailing them to acknowledge receipt.

I have inserted the fact we will use late payment legislation on the foot of the invoice for persistent offenders (but guess we never would for risk of offending them).

What about putting prices up by 15% and then taking it of for payment within 28 days? Sounds like an admin and accounting nightmare.

[Smartie]

Show it as a "credit charge" on the invoice which can be deducted if paid within 28 days.

[BaconBonce]

Sounds like delaying tactics on the part of some of your customers. The cheques in the post

Once you have then sorted out a copy for them, how long generally to they then take to pay it?

If they say they will pay it within 7 days and you don't get payment, phone them and ask where it is.

If they continuously fail at this stage, send them a polite, but firm letter.

I don't how what business you are in, but is it something you can invoice in stages? Maybe a percentage on work commencement, a percentage on sign off and the remainder on completion/delivery. (Good for cash flow to).

Just thinking out loud now, but could you maybe reduce the credit terms (or threaten to) for the continuously late payers?


>> Edited by BaconBonce on Wednesday 17th August 08:47

[PetrolTed]

It's a problem with no clear solution (I've had this a lot over the years).

The bottom line is that it is unlikely that you will change their behaviour. Put your prices up to cover the costs/stress of chasing the debts and accept it as part of doing business these days (frustrating though it is).

I hate this aspect of doing business. To me it's unprofessional to borrow money off suppliers in this manner but many people think it's fair game.

[rossins]

With cust who are regular offenders I chase 10 days prior to payment to ensure invs recd & posted on their comp systems. if the chq is not recd on time then ring to advise that I cannot supply further goods until the inv is paid. I also find that speaking to the accs supervisor to understand how their systems work can sometimes highlight a problem that can be overcome- invs needs sending to another address or marking FAO.
Just my 2p
Simon

[shirepro]

Thanks for that. I thuink I may target my worst offender each month by chasing, as you sugest, 10 days before it is due to ensure they got the invoice and have put it in for payment. We have already started putting the '28 days or we increase the cost' on invoices for the select few. I think if we target one a month it may take the stress off us a bit and getting called every week for a month might sharpen their minds too.

[stuartlynn]

You could try this..... rather than using late payment legislation, which, as you say could risk alienating your customers.... use an early settlement discount regime instead!

I find people are more likely to pay if they think there's something in it for them, as opposed to being threatened... I use this and it's dead easy to administer if you use the right accounts software.

[john75]

When I was in Software sales with a large company we had a customer that would never pay bills on time and even once faxed through a copy of a Bacs transfer it cancelled 10 mins after sending it for about £600k.

Some of the Directors were so pissed of they sent a CD-Rom to them full of bugs which crashed their hard drive.

Only when the payment had cleared in full was a Consultant dispatched to drive very slowly to Manchester to make their IT system work again.

[Pete Cash]

Another idea is to email a copy of the invoice to your client with a read receipt, in addition to the hard copy sent as normal - that way they can't deny receiving it. Works for us, and running a service business we can't threaten to stop supply !

[Tank Slapper]

At a previous job, we had one customer who persistantly failed to pay invoices on time. The usual excuse was that there wasn't a purchase order number on the invoice, however often there wasn't one provided with the order either. We ended up doing cheque on delivery only orders for them. This meant that the accounts department had to deal with their own engineers angry because they couldn't have the parts they wanted. They eventually got the message and agreed to pay on time.

[Greenie]

Large public quoted companies are not good payers. They use suppliers of all sizes to improve there cash flow. There is nothing you can do to change that policy so don't bother. They will pay between 45 and 60 day-get used to it.

The only thing you can do is plan you business and pricing to reflect that reality.

Fight the battles you can win and put your energies into more productive areas for the success of the business.

[JonRB]

I have a similar problem with an agency at the moment - they're refusing to settle outstanding invoices as the client hasn't paid them yet.

As Ted has implied, they're basicaly expecting me to cover their risk whilst I (quite reasonably, I think) feel that this is what they get their comission for. Besides, they haven't a leg to stand on legally / contractually which is why my patience has finally run out after 2 months and they got a Final Demand letter last week with 7 days to pay and I'll be getting legal on them when this period expires (unless my some miracle they pay).

All part of business, unfortunately.

>> Edited by JonRB on Monday 5th September 19:28

[Size Nine Elm]

shirepro said:

What about putting prices up by 15% and then taking it of for payment within 28 days? Sounds like an admin and accounting nightmare.

We've done exactly that with one customer - with their explicit knowledge! Their accounts department are so bad at paying that we have put all rates up by 5%, with a 5% discount for payment within 30 days.

They've only made the discount once in 30 invoices. Which was a shame, because 5% is worth it for a couple of months interest - but cash in the bank is nice to have.

Threatening no further work is only realistic if you really are happy with losing a client - they may well go elsewhere.