If you have been in business long enough then you know the experience of dealing with customers who pay late. This might seem like a small thing on a micro-level but it is a huge collective problem for most businesses. Most small businesses actually suffer inconveniences that emanate from late payments by customers. Late payments by customers can actually stifle business development. This can be through subsequent late payment of salaries, late payment to suppliers and failure to expand the business. All this can be borne from the effects of late-paying customers. Herein I will discuss 3 common types of late-paying customers and I will also touch on how best you can handle them.

Those Who Procrastinate

This is the type of customer who does not necessarily have any financial struggles. They will actually be in a position to pay in good time but they somehow do not prioritize paying you. He or she will be fully aware of the money they have to pay but they just will not pay. Since they are fully aware they might even skirt your attempts to follow up on them. There are basically 3 ways in which you can deal with customers.

Pre: Before entering into a transactional relationship you can two either of two things. You can incentivise them to pay early by various means; for example, an early payment discount. Alternatively, you mandate them to do a down payment (e.g. 50%). You can couple this with an arrangement that unless full payment is made there will not be full delivery of the good(s) or service(s).

During: This will apply to instances when goods or services take time to be delivered to the customer. It can be service businesses such as construction, consultancy and so on. The trick here is to keep the client posted on the progress being made. This will cause them to more likely prioritise payment.

Post: This can be when nearing completion or just after. It is all about reminding the client that delivery or completion is almost near. In the same vein, you then remind them of their payment obligations. You could even hold up delivery or completion if they seem to not be forthcoming in making a payment. Remember they do have the money so a slight hold up will put them inline.

The Structured And By-The-Book Ones

This is the type of customers who likes to do things in a structured manner. He or she wants things to be done by the book all the time. For instance, she might want a quotation before making a payment. They might be the kind of customer who wants certain written guarantees before making payments. Having to be strictly by the book like that can lead to payment delays. This, of course, does not mean it is bad for someone to be that much of a perfectionist – it actually is a consumer right to make such demands. How best can you handle such customers?

Clearly get a grip of why and what exactly the customer needs in terms of documentation. Ensure you have what they need and you can have it ready in the earliest possible time. Also, take time to layout to them how your work processes and the overall system is like. You then marry the two i.e. their demands and your own processes so as to reach a healthy balance. Have a flexible system that entails both physical and virtual documentation. What I mean is you must be able to deliver a quotation, an invoice and so on through any means – physically or virtually (emails and the like). Overall, your business must be well structured and formal so as to meet the expectations of such customers. Otherwise, you will get late payments because you will be taking time to put together certain things the customer needs before paying.

The Busy Ones

This is the type of customer who can literally forget to honour their payment obligations. This will be stemming from the busy nature of their schedules. This type of customer is erratic in their payments because they get immersed in other things and forget to do other things. Here is how you can deal with such types of customers:

You must capture them at the onset by drawing up payment arrangements that are strict. You can demand upfront payment or you can discuss with them a payment plan. Make whichever arrangement signed and binding by having it on paper. This will eliminate the possibility of the customers coming up with excuses every time you follow up on them. That obviously means you will have to regularly remind them – often times they will be genuinely forgetting.

So those are some types of late-paying customers and some guidelines on how to handle them. The issue of payments can be sticky but you must try by all means to do things cordially. Being confrontational might not be necessary at all. You just have to be witty in how you will deal with the varying types of customers. You cannot afford to lose customers so deal wisely in your business affairs.