Delayed invoice payments from clients can stem from various valid reasons, such as missed bills, financial struggles, or a habit of paying late. Regardless of the cause, your business accounting can suffer when clients don’t meet their payment deadlines. However, implementing a few adjustments can incentivize your customers to pay promptly. The most efficient can be hiring a third-party debt collection agency to collect the overdue payments from late-paying customers. Here are some proven strategies to facilitate timely payments from slow-paying customers:
Gain Insight into American Bill Payment Trends
A survey from the Global Financial Literacy Study revealed that a significant number of American adults lack financial literacy, with only 37% passing a basic financial awareness test. This underscores the importance of educating your customers and holding them accountable for their financial responsibilities based on these findings. Understanding how most Americans pay their bills can also streamline the payment process. Key trends in consumer bill payment habits include:
- Online bill payment constitutes 56% of all payments.
- ACH payments increased by 10% between 2010 and 2016, while credit card payments rose by 15%.
- 72% of bills are now paid via the company website.
- Recurring payments are set up for 32% of invoices.
- 40% of older individuals pay their bills via regular mail, with 31% using checks.
- 15% of millennials pay bills via mail, while 8% use checks.
- 22% of millennials pay their bills on their bank’s website.
- 39% of seniors make payments on their bank’s website.
Conduct Customer Due Diligence
Before entering into any arrangement with a customer, it’s wise to assess their creditworthiness and payment history. Slow-paying customers often have a history of late payments. Certain businesses, like property management companies or those offering financial services, can conduct thorough credit checks or background screenings. The more you know about your customers, the more successful you’ll be in predicting their payment behavior.
Set Clear Payment Expectations
In business-to-consumer interactions, we educate customers on how to treat us. This principle also applies to handling slow-paying clients. If there are no consequences for late payments, clients tend to continue paying late. Disorganization, overspending, or poor financial management can lead to multiple bills going unpaid. Clients are more likely to prioritize bills that clearly outline late fees, service shut-offs, or eviction warnings. An agreement with well-defined payment expectations can prompt slow-paying customers to pay promptly.
Enhance Payment Convenience
Given that 72% of American consumers pay their bills online, it’s crucial to streamline your payment methods to expedite the process. Accepting payments on your company’s website or app, allowing customers to access their bills through their bank’s website, and offering various payment options such as ACH, debit cards, and credit cards can increase the likelihood of on-time payments. Additionally, proposing recurring payment options and utilizing different communication channels like email, SMS texts, or app reminders can further facilitate payments. Or hire a third-party debt collection agency to do the work for you.
Follow Up on Past-Due Payments
When clients fail to meet their payment obligations, the past-due amount remains unpaid. It’s essential to reach out to slow-paying customers before their payments become past due. During follow-up calls or letters, adopt a firm yet compassionate approach. Keep in mind that financial emergencies may be causing the delay, and in such cases, establish a reasonable timeline for payment. Offer temporary reduced payments for a few months before reverting to the original terms.
If a customer continues to be uncooperative or unable to pay, it may be necessary to enlist the services of a third-party debt collection agency. Such agencies will work closely with your company to recover the outstanding debt. They will contact your customer with various payment options and will only charge you when they successfully collect the debt. Their pricing is performance-based and tailored to your industry, average account balance, delinquency stage, and frequency of placement.