No business owner likes dealing with delinquent accounts and no business owner should have to. Believe it or not, handling late paying customers is really more of an art than one would think. Encounter enough deadbeat clients and overtime you will see that there are some major similarities among these debtors. Prepare yourself to combat these delinquent accounts by getting to know the 4 most common types of late paying customers and how you can handle each.

How to Deal With The Most Typical Types of Late Paying Customers

1. The Repeat Offenders – You know those customers; the ones who every time their payment date nears you get nervous whether their check will arrive. They repeatedly don’t pay you or at least take their time in doing so. It really puts your cash flow in a crunch. The best way to deal with these kind of customers is to prevent them. Unfortunately, characters like this just tend to be people who have bad financial habits. They are not individuals whom you should be extending net terms to. Therefore, make a habit to do your due diligence on every customer you intend to operate on credit with. Pull their credit reports and check for any red flags. Look specifically at how their payment performance has been in the past. There is no better way to predict how they will pay then seeing how they’ve already done so. If you see red flags, operate on C-O-D (cash-on-delivery) with these customers. It will help keep you from dealing with those repeat offenders.

2. The Forgetful – There is no more annoying type of debtor than those absent-minded ones. The ones who when you call to check up on their late payment claim they totally forgot their payment was due. These people tend to be more disorganized and probably don’t have a single person in charge of managing their receivables. To deal with these customers, do what you must and DO NOT LET THEM FORGET. You need to consitently remind them so they are unable to put it off. If it is a week before payment is due and you still haven’t received payment, send them a friendly reminder. You’ll be doing them a favor. When the due date passes and there still is no money, call them immediately. Then, send more reminder letters, slightly increasing the severity in language as each week passes without payment. Check out these sample collection letters for inspiration.

3. The Misfortuned – Unfortunately, there are those late paying customers you can’t see coming. Those customers who were always loyal but hit a financial rough patch and are in a position where paying you is a bit more difficult than usual. However, don’t completely write these guys off. There is way to make sure you start getting paid immediately but also provide them some flexibility considering their situation. Introduce a payment plan to the customer. At times, this can be the difference between you getting paid or not getting paid at all.

4. The Missing – No type of late paying customer is more frustrating than those who simply vanish off the face of the earth. You send them their invoice and then you never hear from them again. You call and you call and you send letter after letter but nothing seems to be working. These are the moments you must realize that it is ok to ask for help. Turn to a collection agency to deal with your most stubborn debtors. Just be wise in this decision. Do your research on an agency before choosing to do business with them so you know you can trust them with your customers. Although not always the ideal situation, calling in the professionals is sometimes the only answer when it comes to your customers who have pulled a disappearing act.

You can’t look at all late paying customers the same. They each have a reason that their payment is not in and you need to know who you’re dealing with so you can best react. Learn to identify your delinquent accounts as one of the characters above and you’ll have the most well-crafted action plan for each late payment situation.