There's nothing more frustrating than waiting for money. You've built a budget around it. You've planned purchases or payroll on the expectation of receiving it. You may have even noticed a trend of clients who seem to be nonchalant in getting you paid on time. You're pulling your hair out asking, "Why does this keep happening!?" Keep reading to learn why businesses fail to pay their invoices.
Why Your Clients Don't Pay On Time
Your Client is a Bad Fit
It could be that the client isn't a fit for your business. They may be unhappy with your services because they weren't fully in agreement with what you offered anyway. Sometimes a client doesn't figure out what they want until they get what they don't want. They may have not spoken up that they were dissatisfied and now their non-payment speaks volumes.
What you can do: The sooner you know who you are and what you have to offer, the easier it will be to find the perfect client for your business. Craft a picture with your target client's needs and demographics that fit well for you.
Your Client Can't Pay
Maybe, they never could. Your client may have agreed to your goods or services with the intention of paying but, in truth, their credit or working capital never matched up. It could be that their clients haven't paid on time. It could be that they're suddenly struggling financially and haven't had the time or courage to speak up to you about it.
What you can do: Consider running a credit check on your clients. (Our sister company, VeriFirst, offers this service!) Be aware of warning signs that something is amiss and be prepared to fire the client if necessary.
Your Client Doesn't Know How or When to Pay
Does your client know that you are expecting payment from them? You may have made an assumption and haven't communicated this expectation to your client. Here are some reasons your client wouldn't know how or when to pay you:
- If your payment terms weren't clear
- If you don't have a written, signed agreement
- If you haven't invoiced regularly or included the necessary information on your invoice
- If you haven't followed up to determine when payment can be expected
What you can do: Set up payment terms and include them on your contract and invoices. Follow-up with reminder notices for faster payment.
You Haven't Established Consequences for Late or Non-Payment
If your client is a bad fit or can't pay on time, they may specifically not pay on time because they can get away with it. If you haven't set consequences such as late fees or collections, they may pay you later than other vendors that charge for late payments.
What you can do: List consequences for late payments in your contracts and payment terms. Make sure your business is prepared to handle late payments with an accounts receivable collections policy. Set procedures for following up and sending accounts to collections.
When you're waiting on a payment, consider your options. Enterprise Recovery offers accounts receivable clean-up, bad debt collections and legal help for litigation. Get help and work with a company that can offer best practices so your client payments are on time - most, if not all of the time!