Chasing late payments – what you can do to get paid

Cash is the lifeblood of any small business.

Getting paid is critical to survival.

If you have completed work, then you should get paid promptly.

But unfortunately, it doesn’t always work this way.

If you are fed up waiting to get paid for work you have completed you are not alone.

Over 70% of small business owners believe that business in Ireland operates in a culture of late payments.

In this Guide we give you some tips on how you can minimise the risks of not getting paid on time.

First, remember you’re not alone

Chasing delayed payments is a problem for nearly 70% of businesses in Ireland – both large and small.

No business is immune.

Take heart in the fact that regardless of your business or process every business has likely had to chase a late payment at least one.

But there are things you can do to minimise the risk…

1. Set out clear payment terms and conditions

One of the simplest ways to minimise late payments and to help lessen that awkward feeling when chasing them is to have clear terms and conditions in writing with your client from the outset.

Before you start any work with a new client, you should agree the payment terms.

These could be payment upfront, 50% upfront and 50% on completion or 100% on completion.

There are lots of options out there…but have payment terms that work for you (and your client).

Also have a clear timeframe for payment like 14, 30 or 60 days from the date of invoice.

But whatever payment terms you agree, make sure that these terms are clearly set out in writing and that the client is aware of these terms and agrees to them.

Include your terms and conditions on your quotation and on your invoice.

Alternatively, if selling online ensure that your customer is directed to your terms and conditions and consents to them before making any purchase.

Take a look at our guide to choosing the right terms and conditions for your business

2. Add interest to late payments

A lot of small business owners are reticent about charging interest on late payments.

This reticence is understandable… you don’t want to alienate your client.

But the fact is that late payment charges are approved by the government.

In fact, they encourage it.

That’s why they introduced legislation in 2012 to deal with just such a situation – the Late Payment of Commercial transactions Regulations 2012.

This gives you a right to ‘statutory interest’.

You can find out more from our guide on claiming late payment interest

Having charges like this can help faster payment as most of your customers won’t want to pay more.

That’s human nature.

You should clearly note these charges in your terms and conditions and flag them to your clients at the start of your working relationship.

3. Send your invoices on time

Regardless of what terms and conditions you have, you are obliged to provide your customers with an invoice.

Your invoice must include:

• Your business name, address and contact information
• The name and address of the customer you’re invoicing
• A clear description of what you’re charging for
• The date the goods or service were provided (supply date)
• The date of the invoice
• The amount being charged
• VAT amount if applicable
• The total amount owed

It makes sense for your business to have a standard invoice template that includes everything required.

This will make your invoicing process a lot easier.

If you don’t have a standard template, raising an invoice every time you are looking to get paid can become a real chore.

You should also liaise with your customer to see if there are any specific details they require on your invoice – like a purchase order number or another identifying reference for example.

You also need to know who to send the invoice to.

Your day-to-day contact may not be the correct person.

Find out what your customer’s specific payment process is and follow it.

You’re more likely to get paid on time.

If you’ve sent your invoice to their exact requirements, and they haven’t paid, you’ll feel more confident in chasing for payment as you’ll know the delay isn’t through any error or oversight on your part.

4. Build a relationship with your client

A lot of business is built on personal relationships.

Building that relationship not only improves your chances of getting paid on time, but it also helps when chasing up an unpaid invoice.

Friends don’t like to let friends down, especially if you’ve done a great job and provided a quality service.

5. Make payments easy

Offer your customers various payment methods.

The easier you can make it for them to pay the more likely they are to pay you.

If your business collects recurring monthly payments, then consider using Direct Debit to collect the monies.

Many customers simply forget to pay each month, so by automating this for them, it means you get your monthly payments on time.

This makes it easy for both you and your customer.

6. Offer payment instalments

Cashflow isn’t just an issue specific to your business.

It affects every business at some stage in their growth.

So, if a client is struggling to pay you the full amount on the date it’s due, consider setting up regular payment instalments rather than looking for the full lump sum.

If you offer this arrangement, you could charge interest on the payment plan if it’s over a long period of time.

Though it may not be ideal, agreeing to smaller payments over an agreed period of time is better than not getting paid at all.

7. Email communications

When an invoice becomes overdue, its important that you open a channel of communication.

Email is probably the easiest way to do this.

The first thing to do is to send a friendly but firm email to your customer reminding them of the payment due.

Often there has been a simple oversight and payment will be made swiftly.

You should send this initial email a day after the payment becomes due.

If payment is not made within a week, then send a second email and continue to send chaser emails.

Use your own judgement as to how far apart these emails should be and how many you should send.

The tone of each email should gradually get stronger.

If you’re unsure how to phrase these emails take a look at our guide to the most effective email templates to get your invoices paid 

8. Phone communications

If you’ve sent four or five emails and not had any response, it’s time to move onto the phone.

Speaking to someone is more direct, and it’s more difficult for you client to ignore you.

If you can’t get to talk with your client, be persistent.

Keep calling until you do.

Be polite but firm with your first conversation.

Ask questions that prompt answers like:

• “When do you think my payment will be made?”
• “Is there anything I can do to help speed things up?”
• “Is there anyone else I need to talk to about this late payment?”

And don’t forget to emphasise how long payment is now overdue and if there are any additional charges that might be added and when.

Again, fear of charges can act as a catalyst to payment.

This can be a frustrating process but try to remain calm and professional at all times.

9. Written communications

You’ve reached a dead-end with emails and phone calls.

What next?

It’s time to send a formal letter(s).

Your letter must be professionally written and non-threatening if you are to get results.

We have a suite of letter templates for you to choose from.

10. Further actions

If all else fails, then it’s time to take further action.

At this stage, the communication and relationship between you and your customer has likely broken down.

There are a few options you can consider as next steps:

• Hire a mediator
• Make a court claim
• Serve a statutory demand in-person or using a solicitor
• Apply to make your customer bankrupt to recover money owed
• Get your customer’s company wound up (liquidated)
• Instruct a lawyer to send a letter on your behalf and manage legal proceedings
• Hire a debt collection agency

You can find out more about your options in our step by step guide to managing debts  

Don’t give up…

Chasing unpaid invoices can be stressful, disheartening and time-consuming.

These tried and tested tactics should help you to minimise late payments and handle them efficiently and professionally.

Having a clear procedure and process in place will help you and your business as and when this situation arises.