Late payment is a fact of life for many businesses but for many SMEs it can prove to be a constant battle to get paid on time. But it doesn’t have to be that way as small businesses now have more options for taking the leg work out of their credit control than ever before.
Most major cloud accountancy packages include automated invoice reminders that can be used to give your slow paying customer a little nudge when their invoice is overdue.
For those of you who don’t have cloud accountancy packages or if you prefer to take a more personal approach to your credit collections we have a selection of sample late payment letters you can use in your own business. These letters, drafted by the credit experts at Safe Collections, give you ready made templates you can use in your business to ‘gee up’ those clients that always seem to take an age to pay.
Letter 1 – The “We’re sure it’s just an oversight” reminder
What’s it for?
This is a very quick and simple reminder letter you can send to your client the day after payment was due. It’s best to be on top of your credit control from the outset, so when a payment hasn’t arrived make sure your customer knows you know they are overdue.
It can be sent by post or email depending on your customers’ preference, but make sure you have the correct postal or email address. It’s no good sending a chaser letter if nobody reads it!
Letter 2 – The “We aren’t messing around anymore” reminder
What’s it for?
Your first reminder gives the creditor an extra seven days of credit, but if you haven’t received a payment (or reached a mutually agreed compromise) by that time then it’s time to up the ante and let your debtor know that your company takes prompt payment seriously. This letter makes explicit mention of the late payment legislation and leaves your customer in no doubt that they will incur additional charges if payment is not made.
Again this letter can be sent by post or email but in this instance we would recommend recorded delivery for post. If being sent by email, you may want to consider carbon copying in a more senior decision maker along with the accounts payable department.
Letter 3 – The “Show me the money” final demand
What’s it for?
If your client has received and ignored both of the earlier reminders, then you need to show them you take your business seriously and will do what is necessary to protect your bottom line. Nobody likes to issue penalty charges but if your customer can’t or won’t pay on time, then you need to show them that you are prepared to take action.
This letter outlines the late payment penalties in addition to the principal sum and makes explicit reference to the addition of further charges if the debt is placed with a debt collection company.
For maximum impact send this letter by recorded post and email with a read receipt request and make sure it is addressed to the senior decision maker.
In addition to the above reminders, we always recommend that you contact your customer by telephone at regular intervals, to make sure your invoice is never far from their mind. You should strive to be courteous and professional but firm in your pursuit of payment. Don’t accept vague promises of payment in the near future and always look to secure a firm payment date.
Some SME owners can be hesitant to chase a customer for fear of souring the relationship, if this is the case look to delegate responsibility for chasing payment to a trusted staff member or even your accountant or book keeper. This can lessen the awkwardness some business owners feel when it comes to chasing payment and means you can always “blame the book keeper”.