Very few businesses using our debt collection services ever charge, or even threaten to charge, their customers for late payment. Why, when their terms and conditions set out a late payment penalty? Why, when the government provides a statutory right to compensation through the Late Payment of Commercial Debts (Interest) Act 1998 and its amendments?
The answer is fear: fear of alienating their customers at best, and losing them at worst. A reasonable concern, you may think. Then why do those same creditors have no qualms about us charging their customers for our costs and interest? It would be reasonable if it meant they had stopped trading with the buyer; in fact most tell us they continue to trade with buyers who pay their invoices, the interest and our costs.
Put terms into onboarding
Are creditors that fail to penalise late payers accepting the so-called late payment culture, where nobody expects prompt payment? The better culture is to make terms and conditions part of customer onboarding.
Onboarding is the point of least resistance: late payment terms are likely to go unchallenged. Should they meet resistance, that may well mean the buyer intends to pay late — better to learn this before trading than after you have provided goods or services. Once trading begins, adding the late payment penalty intent to your invoices confirms the terms.
Waiving late payment charges in exchange for immediate payment of the principal is a negotiating position you do not have unless the penalties exist in the first place.
Deal with the person, not the entity
With transparent terms of trade, imposing them is key; a call close to the due date will not shock or surprise the buyer. By buyer we mean the point of contact, not the business entity. Companies owe money, but people pay bills — so deal with the person who pays your bills. Hold them to account, confirm what happens next, and thank them for their time and assistance.
