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Tips to Tackle Late Payments

Posted by Kris Coughtry | Thu, Jul 28, 2011 @ 11:53 AM

How to deal with late payments A recent article in USA Today reported that small businesses are still plagued by late payments. The article found that many businesses are finding that receivables are coming in at a slower pace, pushing payments out of the thirty day cycle to something closer to fifty. Late payments are more than an annoyance; they can impact your cash flow, credit rating, inventory and ability to pay your own outstanding bills and payroll.

Here are some tips from CrossCheck that can help prevent late payments and maximize recovery.


  1. Obtain Customer References. To prevent customers from defaulting on debts in the first place, have them complete a credit application before doing business.
  2. Offer Early Payment Discounts. To encourage customers to pay on time, offer 1% 1.5% or 2% discount on payments received within 10 days. This incentive can improve cash flow while reducing the costs associated with collecting late payments.
  3. Provide Several Ways to Pay. For cash-strapped customers, it's imperative to offer more than one payment option. Accepting checks, credit and debit cards, COD or incremental payments may facilitate payment.
  4. Follow a 10-Day Policy. Even your best customers may fall behind occasionally. Make it a policy to follow-up no later than 10 days after the payment is due. By contacting your customers early, you stand a better chance of being paid promptly and preserving the relationship.
  5. Have a Backup Plan. When necessary, outsourcing your stubborn accounts to a professional debt management company makes sense. Pre-collection and fixed-fee collection services provide an affordable alternative to making uncomfortable calls or inadvertently violating collection laws and regulations. Also, third party intervention helps you maintain positive relations with your customers and lets you focus on what you do best.

Paying attention to your accounts receivables and acting early can encourage payment and prevent the added cost and time it takes to collect overdue accounts. 

Topics: Small Business

Written by Kris Coughtry