How to Collect Overdue Payments from Clients and Maintain Good Relationships

Step 1: Avoid Making the Request for Overdue Payment Worse

Stay calm. Don’t put too much pressure on your customers. Although your worries are completely understandable, pushing your customers is not usually constructive, and could result in a clash.

Don’t harass your clients. Harassing looks like calling a customer who won't pay every single morning for 60 straight days and screaming at them. Persistence looks like calling every seven to ten days and giving the client payment plan options by which they can start paying off the debt.

Don’t overplay an emotional connection. The customer may take advantage of this, which can lead to overdue payments for suppliers and customers who know each other. What’s more, be very cautious about threatening with legal proceedings, as this is unhealthy for the long-term relationship.

Step 2: Maintain Open Communication with Customers

Lack of communication between customer and supplier is often a root cause of tension surrounding payments. Some customers may be unable to pay in compliance with initial terms, and you need to communicate with your client on this.

Make sure you document everything. Every time you talk to a client on the phone, follow the conversation by sending an email with the details of what you agreed upon. Certify and copy every letter you send in the mail and save email correspondence. 

Step 3: Prepare for the Worst-Case Scenario

When it looks like a late-paying customer may turn into a non-paying customer, you must approach the situation with tact. Start by sending a collection letter summarizing all the previous contacts you have had and with whom regarding the past-due invoice. Inform the customer that the unpaid invoice will be referred to a collection agency after a specific date. Send the letter certified mail with a return receipt so you can prove the letter was received, should you need to take legal action.

If you find that the customer has declared bankruptcy, you should submit a proof of claim and supporting documentation that explains the debt with the bankruptcy court where the bankruptcy was filed. You must also stop sending past-due notices or calling about the debt. While there is no guarantee that your debt will be repaid, your proof of claim will be on record so the court-appointed trustee can determine if and how much you can be paid once the company is reorganized or liquidated.

Step 4: Use an Intermediary for Payment Relationship Management

A third party intermediary has no emotional attachment to the situation, so the intermediary can act calmly and neutrally to get to a solution quicker. Not only will this save you time and possibly allow for better results in collecting payments from customers, but it could keep you out of legal trouble.

Learn more about strategic customer credit management  for late payments.

Let Allianz Trade Help You Maintain Good Customer Relationships

An intermediary, like Allianz Trade, can demonstrate openness and listen to the customer, pinpointing the source of the problem. Collectors explain they are there to find a solution, explaining the position of the supplier and that they do not intend to act as the customer’s bank. Customers understand these arguments and don’t make the same promises to an intermediary as they do to a supplier they know, especially when the intermediary is of Allianz Trade’s size.

The third party is there to find an amicable solution with a preference for out-of-court negotiation, which is beneficial for both collecting money and maintaining a good relationship with your customers. They are there to find win-win solutions; for example; disputes can be recorded and reported back to the supplier and cash flow issues be reconciled with the offer of a payment plan to make good on an overdue payment.

Late payments from customers don’t have to be the end of your finances or the relationship. Taking these simple steps can help you find a payment solution and maintain a good customer relationship.