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If you’re in business long enough, you’ll eventually run across those clients who never pay on time. If you have to deal with customers who don’t pay on time all the time, this post will help you.

In certain industries, you’ll find that you have multiple clients who are consistently tardy with payment. Understanding how to deal with these situations without alienating your customers and making them feel unwanted is a sensitive issue.

Reasons Why Customers Pay Late

Trying to understand your customers and why they do certain things is a lot like attempting to understand the opposite sex. Sure, you can get advice, read books, and have firsthand experiences, but you’re never fully going to understand how they operate. You’re wired differently and have an entirely unique way of viewing issues, circumstances, and events.

With that being said, customers can be predictable, at times. While you might not always be capable of understanding where they’re coming from, there are plenty of times when you can decipher what’s going on behind the scenes.

In terms of late payments, it’s usually not super complicated. In the majority of situations, one of the following factors is involved:

Low priority

  • You probably don’t want to hear it, but you might not be a major priority for your customers. Just as you do with your business, your customers rank their debts according to how critical they are to their operations. If your product/service is low on the totem pole, you’re going to get paid last.
  • Sometimes there’s a simple explanation for late payments – like a disorganized accounting department. Despite your repeated efforts to collect, they simply don’t know how much they owe, when it’s due, or where it’s supposed to go. While frustrating, you can overcome this issue with sustained pressure and frequent follow-up.

Lack of urgency

  • Have you been extremely lenient with a customer in the past? If so, they might feel like they can get away with late payments in the future. They know that the repercussions are minor and would rather pay off other debts that have negative consequences.

Tough times

  • It’s entirely possible that your customer is going through a difficult stretch where sales have tailed off and they don’t have the financial means to pay you. This is one of the scariest situations, as there’s very little you can do to coax them into paying.

Understanding what’s happening at the root of the problem is half the battle. As you study your late-paying clients, consider these possible culprits and try to identify what’s going on beneath the surface.

Here’s Why it Hurts to Deal With Customers Who Don’t Pay On Time

Late-paying customers are frustrating, but are you overreacting? Are you being ridiculous expecting every client to consistently pay on time? The answer is no. Late-paying customers aren’t just annoying – they’re costly to your bottom line. Here are some of the specific reasons why:

Loss in productivity

  • According to research conducted by Xero, the average small business owner spends 1.3 days per month chasing down late invoices. Roughly 16 percent of businesses feel like late payments result in reduced productivity for the company, while 18 percent say it has a negative impact on employee morale.

Cash flow issues

  • Late payments have a direct impact on cash flow. According to a study out of the UK, 20 percent of business owners have been forced to take a pay cut as a result of late payments, while 26 percent have had to increase bank overdraft use.
  • Approximately 23 percent of business owners surveyed have had no choice but to pay their own suppliers late.

Damaged reputation

  • A single late payment here and there might not be an issue, but repeated late payments can become a major problem, both internally and externally. Inside your organization, employees and staff begin to lose trust in the company and a resentful workplace culture emerges.
  • Outside of your organization, your vendors begin to see you as a risk and may decide it’s best not to waste their time with you (now that you’ve also become a late-paying client).

There are plenty of other situation-specific factors that come into play, but these are three of the biggest reasons why you can’t afford to let late-paying customers continue to slide.

Here’s How You Deal With It

Understanding the “why” behind late payments – as well as how it’s negatively impacting your business on a practical level – is the first step towards achieving a resolution. Once you recognize where customers are coming from, you’re able to make smart and strategic choices about how to proceed.

Every situation is unique and requires calculated execution, but here are a few of the top tips and techniques small businesses like yours use to solve the problem of late-paying customers.

  1. Be Clear on Terms Up Front

Consistently getting paid on time starts with setting clear expectations on the front end. Before you start any project or complete any sale, the customer needs to know exactly how much it’ll cost, when the payment is due, and what the payment terms are.

By clearly explaining the terms and getting the customer to agree to them in writing, you lessen the chances of an excuse. After all, it’s much harder for a client to feign ignorance when there was a clear conversation about the matter.

  1. Personalize the Follow Up

Any type of follow up is better than no follow-up, but be wary of sending automated emails or phone calls to clients. While they remind the customer that they owe money, they don’t do much in terms of instilling urgency. By personalizing the follow-up, you remind them that there’s a face behind the late invoice and encourage them to step up to the plate and make the payment.

  1. Use a Working Capital Loan to Survive

No matter how frequently you contact customers or how hard you try to collect on an invoice, sometimes late payments are inevitable. Unfortunately, you might not be able to handle more than a couple delinquent payments before you notice a problem on your own end. Getting some temporary financial assistance might not be a bad idea in these moments.

“Seeking a small business working capital loan to help cover late invoices gives you the ability to cover your costs so you can maintain good relationships with your supplies, contractors, and employees,” explain the working capital experts at

You obviously don’t want to continue taking out loans to keep your business afloat. But a working capital loan can help you “maintain” during those periods of instability.

  1. Never Get Angry or Threaten

Late payments are frustrating and will probably make you angry from time to time, but always compose yourself before speaking with clients. Angry threats will further diminish your chances of collecting and could permanently damage your relationship with the business.

“Don’t be aggressive; just don’t stop asking,” says Hunter Hoffmann, head of U.S. communications for a small business insurer. “Emphasize that you want to settle up the accounts so you can both focus on more important things. It will become much easier for them to pay you than to keep dodging your calls and making excuses.”

If you’ve exhausted all of your options and you can’t collect on an invoice, you have a couple of different options.

The first option is to simply cut ties and write the payment off. This is what businesses typically do when the amount is nominal and it would be expensive to pursue a legal remedy or collection. If you do go this route, be sure you learn from the situation. Establish a system so that it doesn’t happen again in the future. Unpaid invoices can add up over time and lead to major losses.

When it’s a $300 or $400 invoice, cutting ties is probably the most cost-effective option. After all, legal fees for a lawsuit might double or triple the amount you’d collect. But what do you do when it’s a $3,000 or $4,000 invoice that a client refuses to pay?

In situations like these, you should consider hiring an attorney and pursuing legal action. Not only does this increase your chances of collecting, but it shows your whole organization that you take invoices seriously. It sets a precedent and shows that your business won’t be pushed around.

Putting it All Together

It’s easy to write off a late-paying client as a minor annoyance. But what you’re doing yourself and your business a disservice by ignoring what could be a much grander issue. Consider the negative consequences of late payments and how they have the potential to push your business into a tailspin. It becomes evident that you have to act sooner rather than later.

The good news is that you have options. When customers don’t pay on time, there are different methods you can use to set the record straight. Carefully choose the route that you think is best and don’t be afraid to speak up. Your business is counting on you.