3 tips to identify if a debtor is stalling

01/10/2019

When an invoice becomes overdue, the first conversation you have with your customer is key to identifying how to proceed.

When it comes to late payments, one of the key things you need to do right off the bat is figure out if you’re dealing with a customer who has a genuine reason for delaying payment, or one who is just trying to get out of paying you.

In some cases, disputes, unforeseen circumstances and even human error can lead to invoices becoming overdue. Maintaining regular contact with your client and sending the appropriate reminders that payment is due can go a long way in helping to identify and solve these issues.

However, if you do find that the due date for an invoice has come and gone without payment and you’re not sure why, one of the key steps you must take is establishing the client’s intentions.

Unfortunately, there will be times when you find yourself dealing with a client who will do anything to get out of paying an invoice.

Often these clients will deploy stalling tactics as they are aware that, the longer an invoice goes without payment and the more time and money you spend trying to collect it, the less likely they are to have to pay the full sum.

If you’re able to identify these clients early, you can take further steps to ensure payment. This could mean implementing a more aggressive collection tactic or passing the debt over to a collections agency to help you retrieve the value.

Here are three techniques to help you establish which clients are likely to pay, and which require a more forceful approach.

Give them a chance to explain

When it comes to payment conversations, it’s important to show that you are willing to listen to your clients.

There may well be a genuine reason that the payment has become overdue and empathising with your customer can help you maintain your relationship and increase your chances of finding a solution.

That being said, you shouldn’t feel afraid to ask for some form of confirmation that you will be paid. Even if your client is facing a difficult situation, it won’t take long for an overdue invoice to become a big issue for you as well.

If the client is more than happy to talk about the reason they can’t pay but clams up every time you bring the conversation back round to a payment plan, you may need to start thinking about your own next steps.

Document any conversations you have with your client in an email, including steps going forward they do agree to, any follow up conversations you have scheduled and all the reasons they have given for the late payment, as these may help you if it does come to taking further action.

Let them tell you the solution

When dealing with a late payment that could affect your business, it can be tempting to insist that payment is made immediately, next week, etc.

However, this gives the client an opportunity to make further excuses. Once you’ve listened to the customer’s reasons for the late payment, try responding with something along the lines of “So what can we do today to take care of this balance?”.

The client may state actions they need you to undertake if the invoice is disputed, they may offer a repayment solution, or they may give a date when the invoice will be paid by.

If the client attempts to deflect away from the question, this should ring alarm bells. Any reasonable client that intends to pay will be willing to discuss a way to find a solution that works for you both. 

Set an ultimatum and stick to it

Many companies see handing an invoice over to a collections agency as an extreme step. However, you need to be strict with yourself and your clients about if and when you will take this step.

While in-house collections efforts can seem like a more cost-effective way to chase unpaid invoices, the cost of your time quickly adds up when you’re dealing with a tricky client. Calculate a maximum amount of time you can spend on each case before you end up losing money, and when it’s most efficient to hand it over.

In your early conversations with a late paying customer, you can introduce the idea that if deadlines aren’t met and the case continues to drag out, your policy is to hand over to a debt collection agency. Make it clear when you are getting near to this stage, and then follow through with this deadline.

If a client has promised to pay by a certain date but seems put out at the idea that a debt collection agency will be bought in if this falls through, it could indicate that they are uncertain about or unwilling to make this payment.

Are you chasing a payment from a customer that always seems to have an excuse? We can save you time and money in the long run by collecting any overdue invoices. Call us on 0800 9774848 to see how we can help.