Late paying customers can be a nuisance. While there are many ways to deal with late payments ranging from invoice factoring to working with debt collectors, you are often better off reducing the stress by finding ways to prevent late payments.

Below are 10 examples of various ways in which you can prevent late paying clients. 

Send your invoices promptly

If customers are required to pay the full amount within 30 days of receiving a product or service, it is essential that you send the invoice to them immediately. Sending out the invoice late could reduce the amount of time customers have to collect the necessary funds before the deadline and could increase the chance of late payments/disputes. There are programs nowadays such as this B2B payment service for any business that can automate invoices. This can ensure that customers are invoiced immediately (which is useful if you often forget to invoice people or are too busy to manually invoice clients immediately). 

Set a clear payment due date

Some companies make the mistakes of setting vague payment due dates which can easily be taken advantage of. Instead of asking clients to pay within a month, make sure to specify exactly how many days from receiving the service/sending the invoice. Alternatively, set a specific date that cannot be misinterpreted.

Charge late payment fees

Customers may be more wary of paying a bill late if there are late payment fees. When writing your payment terms in a contract, make sure to highlight the fact that your charge added fees for late payments. 

Consider other late payment penalties

If you don’t offer an essential service, you may also be able to charge extra penalties for late payments. For example, if you could withhold access to your service or even demand that a product be returned. These penalties have to be outlined in your contract – you may want to hire a solicitor to help you with the wording. 

Offer discounts for early payments

A more positive way of encouraging customers to pay on time is to offer discounts to customers that pay early. This won’t just encourage more customers to pay before the deadline, but could lead to quicker payment overall.

Send payment reminders

Some customers may genuinely forget that an invoice is due. A friendly reminder a couple days before the deadline could prompt them to pay you on time. Of course, you should also chase up customers with further reminders if they still end up missing the deadline. 

Accept multiple forms of payment

You can also encourage customers to pay before the deadline by offering a range of payment options. Accepting credit cards could be important when it comes to demanding relatively large payment sums. If you deal with a lot of older clients, you could also consider accepting cheques. 

Offer help with finance/allow payments in instalments

With large payment sums, it could also be worth considering the option for customers to pay bills in instalments. This will mean that it takes longer for you to receive your money, but will ultimately make your product/service more affordable and reduce late payments. An alternative option could be to work with lenders who can loan customers the money for them to then pay to the lender in instalments.

Know when to run credit checks

For ongoing payments, it could be worth considering running a credit check on customers. If a customer has a low credit score, it could be a sign that they consistently miss payments and that they are therefore more of a risk to take on. It does mean that you will restrict access to your product/service, but it could also prevent you from taking on customers who are more likely to fall behind on payments. 

Know when to let go of chronic late paying customers

If a client is falling far behind on payments or is consistently missing payments, you should consider whether it is worth continuing to do business with them. Refusing to continue servicing them could reduce a lot of stress for you and potentially save you money caused by cash flow issues.