All business owners eventually discover that dealing with late payments goes with the territory of running your own business. While in a perfect world all customers would pay on time, every time, the reality is: situations happen beyond our control. Employee absences, lost checks, and miscommunication can all contribute to late payments, delinquent accounts, and the subsequent lag in cash flow.
Unfortunately, customers also have a number of excuses to explain late payments and knowing how to manage customer relations is part of the art of good service. Here are a few common reasons customers give for late payments, and how to handle them in order to get paid promptly.
Their payment is already in the mail.
If your company doesn’t rely on electronic payments, and your customer’s check really is in transit, then the best thing to do is wait for it. Though inconvenient, if they’re a valued customer and late payments aren’t usually a problem, they can be cut a little slack. If they were fibbing, then most likely they will send the check immediately, so the payment posts as soon as possible.
If this happens regularly, however, or you never receive your payment, then it’s well within reason to ask the customer to cancel the first check and reissue the second. Then require the reissued check be sent via certified mail, so you can have a tracking number.
They didn’t receive a bill.
If the accounts receivable department has done everything it can to make sure customers’ payment information is recorded correctly, then it would be unusual for a customer not to get the invoice. That said, post office mistakes do occur.
This is also a common excuse for customers who don’t want to take responsibility for a late or missed payment, because this explanation puts the burden of proof back on the business owner. However, accusing customer of lying is never a good business practice, and there is the possibility the invoice really did get lost in the mail or sent to the wrong spam folder (it happens).
If you’re still using analog invoices, always be sure to always send invoices via certified mail, and require a signature upon receipt, for proof of the transaction. In fact, it’s a smart idea to switch to electronic payments, if you haven’t already, which can also be confirmed upon receipt, for automatic built-in proof of delivery.
They never got the good or service.
While this late or no payment excuse is more common for online transactions and shipping, this explanation is (usually) just another way of putting the responsibility back on the business owner, while buying more time to make a payment.
If you send your product by mail, it should be an automatic practice to always use certified mail. That way a tracking number can serve as proof of the transaction. While it costs extra, it’s worth it for the peace of mind and may serve as proof for a delinquent account.
Their accounting person is sick or on vacation.
While it shouldn’t be your problem if a customer is under-staffed, this is a common excuse customers will try to pull with businesses, especially smaller ones with whom they might have a more casual relationship. But even small businesses and sole proprietors need to get paid on time to keep up adequate cash flow.
There are several ways to deal with this excuse. Depending on the customer, you could ask when their payment person is expected back in the office. If it’s a few days, it may be best to wait and suffer the inconvenience, rather than risk customer relations. Let them know you will need a backup plan for the future.
If the payment person won’t be back for weeks, a company has every right to ask for an immediate alternate payment plan. And remember: customers are still beholden to late payment and collections policies, even if they happen to be understaffed, so act accordingly.
The payment system is down.
Now that most payment processing is electronic, pointing to faulty technology for mishaps, including late payments, has become a common way to avoid taking blame. However, technology can also be on the business’s side when it comes to tracking packages, invoices, and payments.
Sometimes systems really do go down, and customers should get some leeway during the rare occurrence. However, if this becomes frequent (and always, conveniently, when payments are due) it’s perfectly acceptable to ask for another form of payment, such as by check or money order.
Consider: How would your business transform if every customer paid up front, every time?
What is the worst (or best, depending on your perspective!) excuse a client has offered for a late or missed payment — and how did you handle it? Share your stories below.
