Chasing invoices
Discussion
What approach do you lot take when chasing? It might help put things into perspective if you mention what line of business you are in.
My clients are long term, ie I take them on, then look after them on a long term basis. Its the farthest thing from retail, as far as customer relationships go.
People never pay on time, we all know this, but what approach do you personally find works best with the type of clients mentioned above? You cant threaten legal action, the second you do, you make it clear that the relationship is strictly business, and that the "good stuff" you built up (i dare not say friendship, or I'll be shot down in flames) ceases to exist. Im on exceedinly good terms with 90% of my clients, and very friendly with the majority of that lot.
I know. Business is business. But when youve been shooting the breeze and enjoying an entirely positive relationship with someone for many years, its not easy to threaten them with legal action, especially if a large amount isnt owing. My gripe is that Im tired of chasing an average of 30 invoices which remain open at the end of each month.
Im not a complete push over, mind. Im just about to ditch my biggest ever spender/client, on grounds that they havent paid a single invoice in 5 years without it being 2+ months late.
On the other extreme end of the scale (largely where my gripe lies) people who owe £100 or less, but never seem to pay, yet are good clients, nice people, sure to refer new business to you in the future... what does one do when invoices become 3 months overdue? Threaten legal action, and you loose the client (who will move elsewhere, eventually) - its not worth it, over £100.
Grumble groan whinge... back to my accounts
My clients are long term, ie I take them on, then look after them on a long term basis. Its the farthest thing from retail, as far as customer relationships go.
People never pay on time, we all know this, but what approach do you personally find works best with the type of clients mentioned above? You cant threaten legal action, the second you do, you make it clear that the relationship is strictly business, and that the "good stuff" you built up (i dare not say friendship, or I'll be shot down in flames) ceases to exist. Im on exceedinly good terms with 90% of my clients, and very friendly with the majority of that lot.
I know. Business is business. But when youve been shooting the breeze and enjoying an entirely positive relationship with someone for many years, its not easy to threaten them with legal action, especially if a large amount isnt owing. My gripe is that Im tired of chasing an average of 30 invoices which remain open at the end of each month.
Im not a complete push over, mind. Im just about to ditch my biggest ever spender/client, on grounds that they havent paid a single invoice in 5 years without it being 2+ months late.
On the other extreme end of the scale (largely where my gripe lies) people who owe £100 or less, but never seem to pay, yet are good clients, nice people, sure to refer new business to you in the future... what does one do when invoices become 3 months overdue? Threaten legal action, and you loose the client (who will move elsewhere, eventually) - its not worth it, over £100.
Grumble groan whinge... back to my accounts
Automotive glazing.
The majority of my invoices are paid on completion of works. However, I extend a bit of credit to regular / frequent users such as accident repair specialists, main dealerships, garages, small businesses, fleet operators and insurance companies.
There is plenty of customer contact to enthuse relationships with account customers. From time to time there will be a late payer; after the agreed period has lapsed by 14 days I'll call the contact and ask, politely (but directly) if there's a problem. Payment is usually sorted there and then.
Of all the late payers, I find it's the 'favour friends' who give the most problems. But I have NEVER let anyone get away with getting one over me. I find getting a clear understanding before any transaction takes place will define the outcome; as long as both parties agree before exchanging, all you have to do is stay on top of your side of the deal.
There's being adaptable to a change in circumstances, or being sympathetic to a predicament... allowing for the unexpected... and knowing the boundaries of your kindness as a human being and your limits as a business person.
The majority of my invoices are paid on completion of works. However, I extend a bit of credit to regular / frequent users such as accident repair specialists, main dealerships, garages, small businesses, fleet operators and insurance companies.
There is plenty of customer contact to enthuse relationships with account customers. From time to time there will be a late payer; after the agreed period has lapsed by 14 days I'll call the contact and ask, politely (but directly) if there's a problem. Payment is usually sorted there and then.
Of all the late payers, I find it's the 'favour friends' who give the most problems. But I have NEVER let anyone get away with getting one over me. I find getting a clear understanding before any transaction takes place will define the outcome; as long as both parties agree before exchanging, all you have to do is stay on top of your side of the deal.
There's being adaptable to a change in circumstances, or being sympathetic to a predicament... allowing for the unexpected... and knowing the boundaries of your kindness as a human being and your limits as a business person.
Industrial Machine Vision Integrator
Unless the customer is well known for their payment schedule, ie they always pay you month end following invoice, etc, I usually ring up just before the invoice is due asking when I can expect payment, this focusses their mind and ensures that there is no 'lost' invoice. This usually results in payment about 2 weeks later.
I have a couple of customers who are historical bad payers, after threatening legal action in the past I now deal with these customers on a pro-forma basis, ie they pay up front before goods/services are delivered. Another couple of customers who are irregular payers, I make pay for any hardware before delivery but I invoice my time on normal 30 day terms.
It pays to keep on top of clients, I like Bob have long term relationships with my customers and have good working relationships with them all. Most understand that I am a small company and ensure that payment is not delayed for any particular reason. I also have a good flexible arrangement with most of my suppliers (again long term), often I pay them when I receive money from my clients, if it's early I'll pay them early, if it's late I'll pay them later.
I don't invoice as many invoices as you, perhaps 6-10 per month, but every week I review whats outstanding and chase accordingly. I'm not afraid of making a nuisance with a companies accounts department and will ring daily if I don't get suitable answers. BTW most of my clients are relatively large (£5m turnover to huge multinational PLCs).
davidy
Unless the customer is well known for their payment schedule, ie they always pay you month end following invoice, etc, I usually ring up just before the invoice is due asking when I can expect payment, this focusses their mind and ensures that there is no 'lost' invoice. This usually results in payment about 2 weeks later.
I have a couple of customers who are historical bad payers, after threatening legal action in the past I now deal with these customers on a pro-forma basis, ie they pay up front before goods/services are delivered. Another couple of customers who are irregular payers, I make pay for any hardware before delivery but I invoice my time on normal 30 day terms.
It pays to keep on top of clients, I like Bob have long term relationships with my customers and have good working relationships with them all. Most understand that I am a small company and ensure that payment is not delayed for any particular reason. I also have a good flexible arrangement with most of my suppliers (again long term), often I pay them when I receive money from my clients, if it's early I'll pay them early, if it's late I'll pay them later.
I don't invoice as many invoices as you, perhaps 6-10 per month, but every week I review whats outstanding and chase accordingly. I'm not afraid of making a nuisance with a companies accounts department and will ring daily if I don't get suitable answers. BTW most of my clients are relatively large (£5m turnover to huge multinational PLCs).
davidy
Coming from a large PLC in construction - on the other side - if people wanted to get paid the best method was to keep it friendly and regular, get a date when the cheque will go out, if not why not?
I got in trouble on here a while back on this topic, but even in my company if I put a payment forward it had to be approved (not that anyone actually looked at it, they just ticked a box on a system) by up to 4 people (if I sent one out for £1,000,000 plus) before it even went on the list to be paid, then only several on the list were paid on each cheque run.
I got in trouble on here a while back on this topic, but even in my company if I put a payment forward it had to be approved (not that anyone actually looked at it, they just ticked a box on a system) by up to 4 people (if I sent one out for £1,000,000 plus) before it even went on the list to be paid, then only several on the list were paid on each cheque run.
Glassman said:
Automotive glazing.
The majority of my invoices are paid on completion of works. However, I extend a bit of credit to regular / frequent users such as accident repair specialists, main dealerships, garages, small businesses, fleet operators and insurance companies.
There is plenty of customer contact to enthuse relationships with account customers. From time to time there will be a late payer; after the agreed period has lapsed by 14 days I'll call the contact and ask, politely (but directly) if there's a problem. Payment is usually sorted there and then.
Of all the late payers, I find it's the 'favour friends' who give the most problems. But I have NEVER let anyone get away with getting one over me. I find getting a clear understanding before any transaction takes place will define the outcome; as long as both parties agree before exchanging, all you have to do is stay on top of your side of the deal.
There's being adaptable to a change in circumstances, or being sympathetic to a predicament... allowing for the unexpected... and knowing the boundaries of your kindness as a human being and your limits as a business person.
Sound advice. I find the established corporate companies a breeze to deal with (usually) whilst the small joe-public 1-2 man bands (I have many clients of this type) harder to deal with. The "Is there a problem" approach doesnt work, for "as a company with a reputation in the area" they feel less shame in not paying up, on account of a possible cashflow issue.The majority of my invoices are paid on completion of works. However, I extend a bit of credit to regular / frequent users such as accident repair specialists, main dealerships, garages, small businesses, fleet operators and insurance companies.
There is plenty of customer contact to enthuse relationships with account customers. From time to time there will be a late payer; after the agreed period has lapsed by 14 days I'll call the contact and ask, politely (but directly) if there's a problem. Payment is usually sorted there and then.
Of all the late payers, I find it's the 'favour friends' who give the most problems. But I have NEVER let anyone get away with getting one over me. I find getting a clear understanding before any transaction takes place will define the outcome; as long as both parties agree before exchanging, all you have to do is stay on top of your side of the deal.
There's being adaptable to a change in circumstances, or being sympathetic to a predicament... allowing for the unexpected... and knowing the boundaries of your kindness as a human being and your limits as a business person.
IT Consultancy. Mix of long term (3y +) and shorter term work (from 2 weeks to 6 months)
We work on 28 day payment terms but as an incentive offer a 5% discount if we get payment within 21 days of invoicing. It has worked wonders & all but one of our clients now pay promptly. The other one is always good for the money after 2 months & we were aware of that before we took on that particular contract. Considering that we price accordingly, we aren't losing out & everyone is happy. We are in a good position where such a fluctuation in price isn't critical so we have leveraged that.
We work on 28 day payment terms but as an incentive offer a 5% discount if we get payment within 21 days of invoicing. It has worked wonders & all but one of our clients now pay promptly. The other one is always good for the money after 2 months & we were aware of that before we took on that particular contract. Considering that we price accordingly, we aren't losing out & everyone is happy. We are in a good position where such a fluctuation in price isn't critical so we have leveraged that.
bga said:
IT Consultancy. Mix of long term (3y +) and shorter term work (from 2 weeks to 6 months)
We work on 28 day payment terms but as an incentive offer a 5% discount if we get payment within 21 days of invoicing. It has worked wonders & all but one of our clients now pay promptly. The other one is always good for the money after 2 months & we were aware of that before we took on that particular contract. Considering that we price accordingly, we aren't losing out & everyone is happy. We are in a good position where such a fluctuation in price isn't critical so we have leveraged that.
Good skills mate. But in my own game, I wonder how many of the prompt payers (vs the lazyarsed ones) wouldnt have paid early or on time anyway... being small clients and all, where every penny counts...We work on 28 day payment terms but as an incentive offer a 5% discount if we get payment within 21 days of invoicing. It has worked wonders & all but one of our clients now pay promptly. The other one is always good for the money after 2 months & we were aware of that before we took on that particular contract. Considering that we price accordingly, we aren't losing out & everyone is happy. We are in a good position where such a fluctuation in price isn't critical so we have leveraged that.
UKbob said:
But in my own game, I wonder how many of the prompt payers (vs the lazyarsed ones) wouldnt have paid early or on time anyway... being small clients and all, where every penny counts...
I know what you mean. As I said we are lucky in that respect, I can't think of many small outfits running SAP. When we do have problems it's usually around PO's getting stuck in a process or waiting for approval & the only way to get it sorted is to get on the phone, unfortunately as you know, time on the phone chasing stuff is time away from other important stuff.....er like posting on forums 
. In the IT game. Both a software house and systems.
Effectively our software licensing terms state we can withold support and revoke their software license if any invoice is not paid on time.
Most of our customers are aware of this and
the one's who aren't soon become aware of it if they go over 60 days.
Effectively our software licensing terms state we can withold support and revoke their software license if any invoice is not paid on time.
Most of our customers are aware of this and
the one's who aren't soon become aware of it if they go over 60 days.
UKbob said:
Im not a complete push over, mind. Im just about to ditch my biggest ever spender/client, on grounds that they havent paid a single invoice in 5 years without it being 2+ months late.
Are you sure that is wise?Unless the cost of chasing up is astronomical, late money is better than no money?
For example offering a 10% early payment discount would be better financially than getting rid?
Business - International and Domestic Courier Services
We put two prices on our invoices - the price we agree (discount price for prompt payment) and a List price for payments that are made after the clients agreed credit terms.
My Credit control dept, call clients a couple have days before the list price becomes due to remind them that we need a payment if they wish to pay at the discount rate. Some make a commitment to pay after the discount date and are very grateful if we agree to hold he discount rate for a few extra days.
Also if someone does not pay and we have to go take court action, it is the list price that we litigate for. The fact we give a discount rate for prompt payment is in our terms and conditions which clients sign before using us. This make the two-price invoice stand up in a court, (unfortunately I have had to test it.)
A client is only someone who pays for your service - not uses it. In my experience once you threaten legal action the relationship is over. I would also advise you not to waste much time threatening legal action, but to take it. Often people only pay once a court order is served, not when it is threatened.
It would be useful to know what type of clients you have, businesses ie limited liability or private individuals.
I hope this helps,
Darren
We put two prices on our invoices - the price we agree (discount price for prompt payment) and a List price for payments that are made after the clients agreed credit terms.
My Credit control dept, call clients a couple have days before the list price becomes due to remind them that we need a payment if they wish to pay at the discount rate. Some make a commitment to pay after the discount date and are very grateful if we agree to hold he discount rate for a few extra days.
Also if someone does not pay and we have to go take court action, it is the list price that we litigate for. The fact we give a discount rate for prompt payment is in our terms and conditions which clients sign before using us. This make the two-price invoice stand up in a court, (unfortunately I have had to test it.)
A client is only someone who pays for your service - not uses it. In my experience once you threaten legal action the relationship is over. I would also advise you not to waste much time threatening legal action, but to take it. Often people only pay once a court order is served, not when it is threatened.
It would be useful to know what type of clients you have, businesses ie limited liability or private individuals.
I hope this helps,
Darren
JustinP1 said:
UKbob said:
Im not a complete push over, mind. Im just about to ditch my biggest ever spender/client, on grounds that they havent paid a single invoice in 5 years without it being 2+ months late.
Are you sure that is wise?Unless the cost of chasing up is astronomical, late money is better than no money?
For example offering a 10% early payment discount would be better financially than getting rid?
Its not the fact that it arrives late, its the fact that it wont ever arrive, until I chase each invoice half a dozen times via email/the phone, through the same old "chase me chase me, then I'll pay" routine.
I know after sending out an invoice that they wont pay until it has been chased several times. They are aware and have been reminded a great many times that our terms are "on delivery" and that we dont offer any credit, unless otherwise agreed and negotiated beforehand. I might take the pro forma route with them in future, a good suggestion.
UKbob said:
JustinP1 said:
UKbob said:
Im not a complete push over, mind. Im just about to ditch my biggest ever spender/client, on grounds that they havent paid a single invoice in 5 years without it being 2+ months late.
Are you sure that is wise?Unless the cost of chasing up is astronomical, late money is better than no money?
For example offering a 10% early payment discount would be better financially than getting rid?
Its not the fact that it arrives late, its the fact that it wont ever arrive, until I chase each invoice half a dozen times via email/the phone, through the same old "chase me chase me, then I'll pay" routine.
I know after sending out an invoice that they wont pay until it has been chased several times. They are aware and have been reminded a great many times that our terms are "on delivery" and that we dont offer any credit, unless otherwise agreed and negotiated beforehand. I might take the pro forma route with them in future, a good suggestion.
We offer a 15% early payment discount. Of course, this is not a true discount as our costings are based on the discounted figure to gain profit.
As long as this is in your T&Cs before you start and you state that quoted amounts INCLUDE the discount then legally you are fine.
We get a good proportion who just pay on time, and those that dont, to 'chase up' doesnt need a phone call, just a fax letting them know that their early payment discount has expired, and in a roundabout way it has cost them £150 (+VAT) for every thousand quid they owe!
You would be surprised how many cheques for the original amount arrive the next day, of phone calls you get asking for the reinstatement of terms and the client would love to pay straight away.
If not, and indeed the client prefers to pay his bills late each time, then you are also being suitably recompensed in the meantime!
I would also recommend looking at the Late Payment of Commercial Debts (Interest) Act. That gives you the right to claim compensation - £40 for less than £1000 owed and £70 over as soon as the invoice is overdue. As the title suggests, you can also claim reasonable generous interest.
Of course it is meant as a deterrent, and in the last few years only added it to an invoice a couple of times for major problems for people we know we are not working with again.
By the early payment discount loss followed up with the compensation you are giving yourself a couple of 'inbetween' options between the status quo and jumping straight to court.
Business Consultant (jack of all trades really)
Work with around 5 clients (companies with 1-£5m to) for a couple of hours a week each. Always work directly with the MD and as such all but one are very good payers, giving me a cheque no more then a week after asking. Two even allow me to write my own pay cheques! No real stratagies needed except for the one bad payer but he's a pain in general so I just don't work for him so much and factor in a big fee for irritation too.
Cleaning & Building Maintenance
Our clients range from individuals to schools and councils. A 50/50 mix of good and bad. We state 30 days but budget for 60 which most people meet. There are a couple of people who go over this and we have a once a month purge on those, sending out letters threatening court action. As most people by this stage are large public sector finance departments it's not too detrimental to the relationship as their not the people who employ us or who ever deal with our staff. We are quite loose though and I'm meeting with the bank manager to discuss factoring some clients.
And remember the Late Payment of Commercial Debts (Interest) Act 1998 can be quite a useful tool.
Work with around 5 clients (companies with 1-£5m to) for a couple of hours a week each. Always work directly with the MD and as such all but one are very good payers, giving me a cheque no more then a week after asking. Two even allow me to write my own pay cheques! No real stratagies needed except for the one bad payer but he's a pain in general so I just don't work for him so much and factor in a big fee for irritation too.
Cleaning & Building Maintenance
Our clients range from individuals to schools and councils. A 50/50 mix of good and bad. We state 30 days but budget for 60 which most people meet. There are a couple of people who go over this and we have a once a month purge on those, sending out letters threatening court action. As most people by this stage are large public sector finance departments it's not too detrimental to the relationship as their not the people who employ us or who ever deal with our staff. We are quite loose though and I'm meeting with the bank manager to discuss factoring some clients.
And remember the Late Payment of Commercial Debts (Interest) Act 1998 can be quite a useful tool.
Edited by rpguk on Wednesday 3rd October 12:18
IT consultancy and support.
The majority of my income is from fixed cost monthly contracts. I offer a small discount for clients who pay these by standing order or, more accurately, lightly penalise those who don't
I see most of my clients at least once a month and build up good relationships with them, so am in a similar situation when it comes to chasing payment.
The PITA comes when I use my credit accounts at suppliers to order goods for my clients, and the client then delays payment and cocks up my cashflow. All clients have a theoretical credit limit of £500, but this is lifted for those who I know will pay on time.
One client in particular plays the chasing game. When a query is raised on an invoice, I won't actually hear about it until I start chasing. I have seen correspondance which suggests that the MD puts queries on invoices pretty much at random.
The stunt which got their credit line removed entirely was when I ordered £3k's worth of laptops for them on the understanding that payment would be made 7 days after delivery. As an afterthought, the MD asked for some DECT phones for his house which were included on the invoice.
The invoice was put on hold because he didn't like the colour of the phones and wouldn't pay *the entire lot* until they'd be sent back, exchanged, and I'd gone out to reinstall them.
I now refuse to supply anything to them that isn't paid for up front.
The majority of my income is from fixed cost monthly contracts. I offer a small discount for clients who pay these by standing order or, more accurately, lightly penalise those who don't
I see most of my clients at least once a month and build up good relationships with them, so am in a similar situation when it comes to chasing payment.
The PITA comes when I use my credit accounts at suppliers to order goods for my clients, and the client then delays payment and cocks up my cashflow. All clients have a theoretical credit limit of £500, but this is lifted for those who I know will pay on time.
One client in particular plays the chasing game. When a query is raised on an invoice, I won't actually hear about it until I start chasing. I have seen correspondance which suggests that the MD puts queries on invoices pretty much at random.
The stunt which got their credit line removed entirely was when I ordered £3k's worth of laptops for them on the understanding that payment would be made 7 days after delivery. As an afterthought, the MD asked for some DECT phones for his house which were included on the invoice.
The invoice was put on hold because he didn't like the colour of the phones and wouldn't pay *the entire lot* until they'd be sent back, exchanged, and I'd gone out to reinstall them.
I now refuse to supply anything to them that isn't paid for up front.
joewilliams said:
The invoice was put on hold because he didn't like the colour of the phones and wouldn't pay *the entire lot* until they'd be sent back, exchanged, and I'd gone out to reinstall them.
I now refuse to supply anything to them that isn't paid for up front.
Agreed, and by the way witholding payment like that is completely illegal when there is no problem with the main body of the order.I now refuse to supply anything to them that isn't paid for up front.
In fact, it may even look like that might have been the plan from the start...
the "Late Payment of Commercial Debts (Interest) Act 1998" looks good. How much interest can one charge (or threaten to charge) and I assume this is calculated on a per month divided by the number of days overdue basis?
Just received a call from the MD of the company I was talking about, who is popping a cheque in the post today, after hearing from his right hand man that after 5 years of chasing invoices, Im 'just about ready to throw in the towel' - result
Just received a call from the MD of the company I was talking about, who is popping a cheque in the post today, after hearing from his right hand man that after 5 years of chasing invoices, Im 'just about ready to throw in the towel' - result
UKbob said:
the "Late Payment of Commercial Debts (Interest) Act 1998" looks good. How much interest can one charge (or threaten to charge) and I assume this is calculated on a per month divided by the number of days overdue basis?
Just received a call from the MD of the company I was talking about, who is popping a cheque in the post today, after hearing from his right hand man that after 5 years of chasing invoices, Im 'just about ready to throw in the towel' - result
The flat rate bit is fixed and *can* be applied the day the invoice is overdue. Just received a call from the MD of the company I was talking about, who is popping a cheque in the post today, after hearing from his right hand man that after 5 years of chasing invoices, Im 'just about ready to throw in the towel' - result
The interest can be calculated daily. There is also a slight complication in that the interest is subject to not only the Bank of England base rate which of course fluctuates, but also what it was at a period some time ago... Have a look on the websites and it will give you an idea.
What I have done is used the interest as another 'step', so I would
1) Warn about losing the discount
2) Take away the discount and warn about Late Payment charges
3) Put on the flat rate, and hold off interest as a 'gesture of goodwill' for payment in seven days
4) Charge the whole lot and issue a final warning of legal action.
There you have a few steps for them to realise that THEY are losing out if they are late, whilst of course each step means you are compensated for your time that bit extra each time!
Web Developers
After about three months of gentle badgering I am in the wonderful position of having virtually all clients as hosting clients too and so we simply turn off their emails. This normaly gets a reponse by phone within minutes.
Unfortunately not many businesses can do this sort of thing but as a very last resort this get very good results.
After about three months of gentle badgering I am in the wonderful position of having virtually all clients as hosting clients too and so we simply turn off their emails. This normaly gets a reponse by phone within minutes.
Unfortunately not many businesses can do this sort of thing but as a very last resort this get very good results.
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