Taking the Emotion Out of Late Payments- Strategies to Protect Your Business and Peace of Mind

Late and non-paying customers can be emotionally draining for your small business. Whether you’re operating a lawn care company, veterinarian practice, heating and air conditioning business, or any other small operation, having customers who don’t pay on time is just part of being in business.

While large organizations have their share of the same challenge, your small business can feel the pain of customers not paying far deeper. And if you’re a small business operating in a smaller community and you get to know many of your customers, this challenge is even more difficult.

Many small businesses come to us for help with their receivables and we can feel the emotions brewing inside them. They’re frustrated, baffled sometimes and many of them are angry that they have not been paid.

You can certainly have a passion for your business but if you’re going to navigate the ups and downs of cash flow, you’ll have to equip yourself to minimize the emotional aspect of getting your customers to pay.

Check out how your small business can go from emotional to empowered and manage your late-paying customers.

Clearly establish payment terms upfront

One of the first steps in removing the emotions from your accounts receivables is to have adequate systems in place. And one of the key parts of those systems is clearly articulating how and when your small business needs to be paid. Not wanting to be paid…. How you need to get paid. Your invoice or contract with your customer should clearly outline payment terms. Some common ways small businesses communicate are Net 15, Payment Due Upon Receipt, or a specific due date on the calendar. You should also include any late fees for overdue payments.

Establishing clear and simple payment terms removes any ambiguity and will set the tone for your expectations.

Create a standardized payment policy for customers that have not paid

Your small business needs to have a process in place for when customers do not pay. And everyone on your team responsible for accounts receivables should follow the same process. For example, written follow up or statement after 30 days past due. At 60 days past due, a gentle reminder by phone. At 90 days past due, hand that account over to your collection agency. You can use whatever interval your small business feels necessary. For example, many small businesses hand that past due invoice off at 60 days to a collection agency.

More importantly, you must be consistent in applying your policy to all customers who are late.

Automating invoices and reminders

Another way to remove the emotions from late paying customers is to remove yourself partially from the process. Many accounting software programs now allow you to automate invoicing and those reminders. Your customer will get a friendly reminder if a payment is not entered into your software on the due date. This is one step in detaching you emotionally from the process.

Ask your bookkeeper or CPA about the functionality of your accounting software.

Using a reputable collection agency can separate your small business emotionally

You can create a buffer between you and the customer regarding payments by initially hiring a bookkeeper or accountant who can operate as a third party.

However, you should also utilize the services of a reputable collection agency. While some small businesses may hesitate because they do not want to alienate any customers, using a collection agency that treats your customers fairly and tactfully can be one of the best decisions you make. It can emotionally remove you and your team from the awkward moments of collecting money.

This can be especially effective if you’ve built personal relationships with your small business customers. And while not all customers take advantage of small businesses, some can use that as a way to put off payment because of that relationship.

Just make sure you are confident that the collection agency you choose will treat your customers with dignity and respect because after all they are an extension of your business.

Shifting your perspective can minimize the emotions of late payments

In many cases, when a small business receives late payments or does not get paid at all from customers, the problem revolves around their personal circumstances. The most common are financial difficulties or a change in employment status. Recognizing this is important and will help you navigate the uncomfortable times of cash flow.

Of course, your small business may also need to navigate disputes in service or price. Many consumers dispute fees or charges by not paying at all. This can also take an emotional toll on you and your team, but it’s important to remove the emotions and identify ways to resolve the past-due invoice.