Reasons Behind Late Payments and Solutions
Purchase on credit is a common practice in Pakistan. No matter the size of your business, people always have that bunch of clients who are used to paying late. Whether it’s a customer who constantly crosses the deadline or that one-timer who completely gets away with it, dealing with these customers can be pretty stressful.
Though it’s not a recommended practice for any business to sell goods on credit, however, sometimes owners get lucky and those one-timers become life-timers. Moreover, there are several examples of businesses that solely run from trade on credit.
Reasons Why Customers Pay Late
- You probably won’t like it, but you may not be your customers’ first priority. Same as you do with your business, your customers value their debts according to how significant they are to their work. If your product/service ranks low, you’ll get paid last.
- Sometimes there’s a simple explanation for pushing deadlines – like a dysfunctional finance department. Despite your repeated reminders to collect payments, they simply don’t have any knowledge, when it’s due, or where it’s supposed to go.
Lack of Urgency
- Extreme leniency with a customer can drive a lack of urgency. Sometimes, they might take you for granted and feel like they can get away with it. They know that the consequences are minor and would rather settle other debts that have negative outcomes.
- This is one of the troublesome moments when you realize you can’t do a lot to force them into paying. Your customer is going through a difficult time where sales have reached the bottom and they don’t have resources to pay you.
Here’s How You Deal With It
Understanding the reason behind late payments is only the first step towards achieving a resolution. Once you recognize where customers are coming from, you’ll be able to make better choices for your business.
State Your Terms Up Front
Consistent on-time payments start with setting clear conditions on the front end. Before you start any project, the client should exactly know the cost, when the payment is due, and what happens in case of a breach.
By clearly mentioning the terms and getting the customers to agree to them, you minimize the chances of excuses. After all, it’s much difficult for a client to feign ignorance when there was a clear conversation about the issue.
Personalize the Follow Up
Any type of follow up is better than no follow-up, but be careful when sending automated emails or phone calls to clients. While they prove to be a decent reminder to the customers, they don’t do much in terms of provoking urgency. By personalizing the follow-ups, you make sure they know that there’s a face behind the late invoice and encourage them to step up and make the run for it.
A Little Help From Technology
You can go take the harder way or you can think about it and work smart. There is a possibility that you keep on sending automated emails and phone calls to your customers and they still don’t respond. Maybe these emails are the reason this matter loses its urgency or becomes less important to clients.
The easiest solution for me is a mobile application that keeps records of all your transactions and sends auto-reminders to customers to pay their debts. These aren’t just auto-reminders, you can customize your message with a little bit of love and simplicity and send it to your clients without any hassle. You won’t even know it and would get your payback even before the deadline. One such app is the Udhaar app.
Udhaar app is an online ledger (like an online khata or journal) to record your outstanding debt, and send auto-reminders to customers to fasten Udhaar collection. It’s your business’ personal Khatabook that holds every little information about your transactions. Udhaar is an easy, safe, and reliable app with amazing features like reporting, multi-language support, data backup, offline mode, and many, many more.