8 Killer Strategies for Handling Late Payments

Late payments have become one of the burning issues of the modern economy. From companies working in developing countries to online business collaborations to business ventures in powerful economies, many entities are struggling to get paid for their work.

According to the results of the report published by the UK Federation of Small Businesses, about 30% business payments weren’t made on time in 2016.

Since this problem equally bothers the large and the small, it’s crucial that you master some practical strategies that will protect you from late payments.

This is why we’ve decided to put together some practical tips for new businesspeople.

Set clear rules in advance

One of the most common mistakes that rookie businesspeople do is not setting the rules of the game in advance.

More often than not, you have no right to ask your client to behave in a certain way if you didn’t put that in writing beforehand. For instance, you might reach a verbal agreement on the payment terms, but it won’t be valid unless it’s formulated in an official contract.

Of course, this formal document can come in various forms, so it’s important to learn more about different types of business contracts before you set out on your business quest. Once you’ve prepared a few contract templates for your work, you’re ready to start reaching out to your potential clients and negotiating the terms of every single collaboration.

Combine flexibility and assertion

Every type of business requires a certain degree of diplomatic skills.

Being polite doesn’t mean being gullible. As opposed to that, being assertive doesn’t mean taking a hostile attitude.

From the aforementioned contract-forming period to negotiations, milestones and the completion, it’s vital to know how to react in different situations.

This is where we get to flexibility.

A flexible businessperson will loosen the reins a bit when it’s clear that doing such a thing will bring more benefits than sticking to strict rules.

Let’s say that a long-term client suddenly stopped paying you for the project you had done for them. A flexible entrepreneur will contact that client and inquire about the reasons for those payment delays. If the explanation offered by the other party seems reasonable, the smartest thing to do is to offer to adapt their payment plan.

Paying in several installments, rescheduling the deadlines or payment periods are all great ways to show your client that you understand their problem, but that you want to get paid, as well.

Protect yourself in advance

Even if you put everything you discuss with your client in writing, it still doesn’t guarantee getting paid on time or at all.

What can help reduce the risk of late payments is insisting on payment milestones, as well as a down payment. Getting a part of the total sum for a certain project in advance will bring a two-fold benefit. On the one hand, you’ll be motivated to collaborate with a client who is willing to make an upfront payment. On the other, that client will ensure that you approach that project with utmost determination and seriousness.

As for the milestones, they will be different from niche to niche.

For instance, an app developer can set milestones for every completed stage of the app-developing process. That way, both parties will have enough time to give each other feedback and make the payments pre-set for every single milestone.

Reward early payers

Since the early bird catches the worm, it’s fair to reward that very bird.

Translated to business and finances – think about offering some discounts to people who pay you for your services or goods before the invoicing date.

Giving such incentives to your clients might just be the reason why they’ll wish to work with you again. You’ll have more work and, consequently, higher revenues. The client, on the other hand, will know that they can rely on you and save some money along.

Moreover, it’s recommended to adjust your regular rates for long-term projects. While applying the hourly rate system is more than reasonable when you’re making a logo, more demanding and comprehensive design projects might work better if you set the total price for the entire project.

That way, it will be easier to ask for a down payment, set a few milestones and offer your client a discount.

Automate the payment timeline

Ensuring efficient tracking of all the accounts payable and receivable is an effective way of avoiding late payments.

You can choose several different tactics to reach that goal. For instance, hiring an accountant for this purpose is an old-school, but still helpful option for keeping your invoices and books in order.

On the other hand, you can rely on one of numerous invoicing software tools. What you need to do is enter the dates of invoices and the sums you’re waiting to be paid.

Most modern invoicing solutions can be set to automatically send reminder letters to payers, as well as remind business owners of the payments they’re expecting.

Additionally, you can include the penalties you’re going to use against late payers in those automated reminders and invoices.

Such an approach will show your debtors that you’re a serious business player.

Work only with highly rated clients

More often than not, prevention is the best cure for any potential late payment hassle.

You can do a lot for your business if you do some research about a new client before you agree to work with them. The development of online job platforms, such as People Per Hour, Upwork, Freelancer and many others has immensely helped businesspeople on a global scale.

Thanks to these platforms, you can check the job record of every potential client that contacts you.

As a result, the risk of working for an unreliable payer or a problematic business entity is much lower than it used to be in the pre-Internet era.

Apart from these freelancing websites, social networks, such as LinkedIn and Facebook, as well as Glassdoor can also provide you with a lot of invaluable information about both individual business professionals and companies.

All these features should help you stay away from irresponsible clients.

Determine the repercussions

When your clients are aware of the repercussions of their late payments, it’s highly unlikely they’ll try to dodge the due dates.

So, make sure that you include these special measures into every contract you sign with your clients.

For instance, you can put an addendum that unambiguously discusses all the consequences that not paying you or paying you late can provoke. Those measures can vary, from special fees that they’ll have to pay if they break the payment deadline, to refusing to send them the final product until they cover the total agreed sum.

Also, if recurring reminders don’t work, feel free to warn late payers that you’ll have to take some more serious moves.

This is especially important when it comes to greater projects since such a debt could endanger your business altogether.

As for the reminders, make sure that they’re sent before the invoicing date, on that very date and a few days afterward.

However, if your requests are still ignored, send a serious letter of demand. You can find a great template here, in the business section of the Australian Government website.

Turn to debt collectors

The last tactic in this guide, as well as the last one you should use in reality, is turning to debt-collecting agencies.

This is an unpopular measure because you might feel bad for causing additional problems to someone who already has some financial issues. Also, if the sum in question isn’t large, it’s not worth wasting time and resources on debt hunters.

Nevertheless, if you’ve spent months working on a demanding project and the client simply vanishes when they need to pay you, you have to react in an authoritative way. Still, be careful when choosing a debt-collecting agency for your case. Just like in any niche, there are great debt collectors, but there are scams, as well.

If you want to find out more about the way they work and what details to pay attention to, have a look at a well-researched article published on Businessnewsdaily.com.


Working without a payment is one of the most humiliating feelings a worker can experience.

Also, late payments have a negative effect both on your morale and on your balance sheet. This is why no businessperson should allow anyone to be late with their payments.

The strategies provided in this piece will help you build a firm anti-debt policy for your business and bring numerous benefits in the future.

Mark Thomasson
Mark is a biz-dev hero at Invoicebus - a simple invoicing service that gets your invoices paid faster. He passionately blogs on topics that help small biz owners succeed in their business. He is also a lifelong learner who practices mindfulness and enjoys long walks in nature more than anything else.
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