Late invoice payments are a problem for any business, and under normal circumstances can lead to all manner of cash flow problems and affect your profits significantly. However, during this challenging period, where many businesses cannot operate at full capacity, invoice payment collection issues are rife.
With the wide-spread disruptions that Covid-19 has caused globally, your business might need to handle late or missed payments. Dealing with them, however, presents a challenge. You don’t want to damage relationships with your customers who are experiencing severe difficulties at the moment. You yourself may have difficulties paying invoices on time due to constrained income or cash flow. Everyone is dealing with the same global situation, and it requires compassion and fairness to ensure economies stay active, and businesses afloat.
Businesses cannot rely on their old protocols for handling late payments, as there are extenuating circumstances affecting everyone. By offering some relief or leeway, you will keep your good relationships post-Covid-19, and into the future.
Here are our top tips for managing late payments during quarantine, and keeping your relationships secure.
1 – Keep your admin in order
To keep payments coming in smoothly, make sure your invoicing and statements, etc are up to scratch. Stick to your standard routines and don’t invoice later than usual. The same applies to your follow-ups and payment arrangements – make sure they are properly recorded on your system to ensure there are no mishaps or confusion. Automated debit order management can also help you avoid any breakdowns in your admin chain.
2 – Keep relationships strong
Now more than ever before it is critical to keep strong relationships with customers. Approach every contact with your clients with understanding, empathy and compassion. Get in touch and talk to them directly about the specific issues they are experiencing. Try to make updated, more flexible payment arrangements to help them in the short term, or allow part-payments. The important thing is to focus on keeping a good relationship, while at the same time keeping your business liquid.
3 – Keep up to date with the situation
It is an unfortunate reality that some businesses are going to fold during this period, and some of those might be your customers. It is therefore critical that you stay up to date with what is happening in their industry, and with them specifically, so that you can try to preempt any insolvencies or bankruptcies.
4 – Reward customers for early payments, and minimise penalties for late payment
Incentivising clients to pay early can help your cash flow and can also assist your customer.
Consider, for example, offering a percentage discount, or some other reward, for paying immediately on invoice, or earlier than the expected normal payment date.
On the other side of the equation, don’t punish customers too harshly for late payments, as these might simply be unavoidable. For example, if you routinely charge a penalty for payments over 30 or 60 days, consider removing penalties for payments up to 90 days. Alternatively you could agree that penalties won’t apply, as long as a specified percentage of the outstanding amount is paid in time.
There are many different ways you, your clients and your suppliers can work together during these extremely challenging times to keep as many businesses from shutting permanently, or finding themselves in severe financial difficulty. How you handle things during this time will affect your relationships for many years to come, and could impact – positively or negatively – on your reputation. It’s worth taking the time to think of creative solutions that will be mutually beneficial to everyone involved.