Customer consistently pays invoices late

  HighTower 09:47 11 Aug 2007
Locked

What do you guys do when you have one customer who consistently pays their bills late (very late!)? I have one in particular who are quite a good customer, but absolutely never pay on time. I send reminders and my invoices are crystal clear as to my terms.

I've spoken to their accounts dept before and explained the importance of this to me, but to no avail. I've thought of four options:

1) Account goes on hold when invoice is overdue.

2) Administration charge applied when payment is late (shaky legal ground perhaps?).

3) Offer an incentive - 5% off this bill if you pay by . . .

4) Be a wimp and do nothing!

Option 4 is out of the question, so what would you do? I've worked with this customer for a while now, but don't mind at all kicking up a fuss - again!

(Apologies if this isn't in the correct forum - FE feel free to shift it if you prefer).

  mco 10:32 11 Aug 2007

(I presume it is for a website) put up a holding notice on their website, not giving anything away to the public but making it clear to the customer that they won't get their site back on line until they pay up? Is that what you meant by option 1?

  HighTower 11:23 11 Aug 2007

Now that would really pee them off and probably damamge the relationship. By putting the account on hold I meant that new work is not carried out until the account is paid.

The work I do is ongoing and bills go out every month.

  Forum Editor 13:46 11 Aug 2007

and almost everyone who runs a business has at least one client who is a late-payer. I certainly have had a few of them over the years, and in the end I found that a blunt-instrument is usually better than a subtle reminder.

My policy is to write to such companies and tell them honestly that as a small business I rely on invoices being paid promptly, and that in future if payments are not made within 30 days of the date of the invoice, interest will be added to the account In accordance with the EU Late Payment of Commercial Debts regulations.

I don't offer people incentives to pay their bills because I don't see why I should - they committed to pay for the service in the first place, and I've done the work. I don't want to damage a business relationship, but I'm not going to work for nothing - if clients can't understand that prompt payment of commercial debts is a legal requirement I don't pussyfoot around. In the worst cases I simply tell them I'm doing no more work until all outstanding payments are received.

  HighTower 14:04 11 Aug 2007

FE, I'm in complete agreement here with you. I thought about an incentive but then thought 'well, why?". An incentive to pay a bill for work I've done? It's just nonsense. Pay the bill! Simple as that!

Thanks for the reference to the EU Late Payments regs, that is very useful and I think that I'll contact them with that and explain that basically if they pay late, they pay more! If x days later the invoice still isn't paid then its 'account on hold' time.

It bothers me because MY payments come out of my account monthly, so I need to be paid promptly in order to cover these. If these guys don't pay me for say eight weeks I can't ring up Halifax and say "sorry about the mortgage payment guys, I've got a bill due in, what's that - you completely understand? Just pay whenever? Great, thanks!"

I'll keep you informed. Thanks again.

  Forum Editor 16:24 11 Aug 2007

who consistently pays late - usually up to three months after the due date. He runs a large and very busy clinic in the private health sector, and I do quite a bit of work for him, one way or another.

I tried everything to get him to pay on time, but failed, so now he pays extra - his fee bills are increased to reflect the length of time I know he'll take before he pays. He's happy because I don't press for payment, and I'm happy because I know he's paying a premium for the privilege - there's more than one way to skin a cat, as they say.

  HighTower 16:36 11 Aug 2007

It's great that the two of you have an agreement that you are both happy with.

But if I have a bill and have been allowed credit then I always pay within the credit period - without fail. I've never paid an invoice late yet, and that's in around 6 years of business (not that long I know, but the priniciple remains).

I have one customer who I told to just pay when they could, anytime after the 30 days, but that's fine because I said they could so it was on my terms.

Call me old fashioned but that's just the way I work.

Anyway, I have ammended my terms and conditions and these will now be sent out with each invoice, so thanks again. We'll see if it works.

  DieSse 18:02 11 Aug 2007

OR - just try billing in advance.

Back in the days when I had to chase accountants in large companies for late payments, I always used to delight in telling them (at the right point in the discussions) we were not discussing their money and their cashflow, we were discussing my money and my cashflow. Didn't help that much, but it usually produced some silence at the other end.

On the other hand, I had an acquaintance who ran a model railway shop with a perennial cashflow problem. he told creditors he had a totally fair system for paying accounts each month - he put all the bills in a hat, and paid the ones picked out. The clincher was, that if you pressed him too much, he didn't put your bill in the hat.

  HighTower 19:40 11 Aug 2007

Same customer I am having problems with didn't pay their hosting bill until is was too late. As a result their site went offline. Their hosting was arranged independently by their accounts dept so I had nothing to do with it.

When they called in a panic because their site was offline I couldn't help but feel slightly smug as I explained why.

So, this is a consequence of not paying a bill in time, and I think that there has to be a consequence or people will continue to take advantage of you.

  Patr100 12:26 12 Aug 2007

Interesting thread. slightly related aspect. If one is commissioned primarily to design a site - whats the best practice in handling necessary third party charges (and renewals) such as domain regs and hosting. assuming I am not a reseller?

  HighTower 12:52 12 Aug 2007

was until I became a reseller I left the hosting entirely up to them. This meant that I didn't have to pay out to the hosting company and then re-bill the customer and have them not pay for another x weeks.

If I did handle the hosting for customers I made sure that I invoiced a month before the hosting was due, so their money was in my bank and I used that to pay for it rather than my own funds.

Now I am a reseller I use the same practice - I bill a month before and explain the importance of paying on time or the hosting will expire. I basically say that if they don't pay then the host will suspend the hosting and that's beyond my control.

This isn't really the case as I pay one monthly fee for all my hosting accounts, but it tends to mean that bills get paid on time. If they ever leave it so that there is just one day left and they haven't paid then a quick 'panic' call reminding them that their site is about to go off-line generally always yields results!

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