How Direct Debit solves late invoice payments & chasing late payments
You don't want to chase late payments anymore and we don’t blame you.
While you can’t control other people’s behaviour, you can put structures and terms in place that ensure you receive the funds you are owed on time.
Here are our top practical tips and insights to help you deal with late invoice payments (and avoid any issues). Plus, how a payment solution like Direct Debit can help you get paid on time.
Know your late-paying customers
Life can throw us some unexpected curveballs. Sometimes, it’s simply impossible to meet a payment deadline. One-off late payments are not the end of the world; it’s the repeat offenders that cause longer-term issues.
So, identify customers that tend to pay their invoices late. Highlight customers of concern, particularly those who could be experiencing cash flow struggles or other roadblocks preventing them from paying on time.
To do this, keep an accurate record of the invoices you have issued, their due date, the payment date, and any follow-up call and emails you are forced to make.
Common excuses for late invoice payments (and what to do about them)
Dig into the why. What excuses has each of your late-paying customers given? For example, are they unhappy with the product or service you provided? Are they experiencing issues with their own business? Have they recently made changes to their accounting staff?
From there, you can devise a win-win solution – let’s take a closer look at three of the most common late payment excuses.
Excuse #1 We don’t have the cash to pay in full right now
No business is immune to cash flow problems, especially in today’s uncertain climate. The solution? Breaking down the total owed amount into a payment plan. As a result, your customer can manage smaller payments more easily, and you still get the funds you’re entitled to within a timely manner. Plus, no more chasing up.
Excuse #2 Our company makes payments on a specific schedule
The key to this conundrum is communication and negotiation:
First, clearly communicate your payment terms. Ensure the payment deadline is stated on your invoice, whether it’s seven, 14 or 30 days after issuing.
Then, consider discounts for payments made within that time frame.
Alternatively, you can set up a payment plan for your customer that fits with their existing schedule.
Excuse #3 We forgot about the invoice
If you are like most business owners, you can likely understand how someone might forget to make a payment. The email gets opened, your business’ name gets added to a to-do list, and it quickly gets buried in other urgent or mission-critical tasks. It’s an innocent mistake but frustrating, nonetheless.
Payment reminders are an excellent way to resolve this issue. In most cases, a reminder sent two to three days before the invoice is due should do the trick. If this doesn’t work, wait for another two to three days after the due date to send a second follow-up.
It’s also worth experimenting with different payment reminders. Here are some ideas to get you thinking:
Create a short final notice reminder. Use strong words to generate a sense of urgency and state any late payment penalties.
Send a statement of unpaid invoices that includes the total amount owed and payment instructions. This makes it easy for your customer to pay then and there – they don’t need to trawl through old emails.
Charge a late payment fee. If you opt for this tactic, be sure these fees are explicitly outlined in your payment terms and understood by your customer before you do business.
How to make payments easy for your customers with direct debit
Effortless payment systems can transform a late-payer into someone that always pays their invoices before the due date.
Here are three no-brainer tips to streamline your payments:
Send invoices promptly. The sooner you send them, the sooner you’ll be paid.
Request a partial payment or deposit upfront. That way, the final bill amount will be lower, making it easier for cash-strapped customers to pay in full.
Implement automated payments. Say goodbye to late or missed payments associated with direct deposit for good. Ezidebit can set up a direct debit option for your customers. This will improve your cash flow, normalise your income stream, and save you time (and the awkward phone calls).
Accept payments on time with Australia's leading direct debit provider
Learn more about implementing direct debit with Ezidebit — the only set-and-forget payment system you’ll need. Contact Ezidebit today for more information.