In a recent conversation with a client about the kind of ‘pain points’ they experience in day-to-day business they highlighted their frustration at not being paid on time by some clients. Probing this issue further, they went on to say that the problem was not always a case of not being able to speak with someone but was more about the excuses they were given as to why they would not be receiving payment. This led to an in-depth discussion as to what constitutes a genuine dispute or query, as opposed to just being an excuse, and how to deal with them.
When it comes to understanding and confronting reasons why a customer is unable to settle their account it is essential to determine whether you are being offered a genuine reason or merely an excuse. A valid query would suggest that something has happened to prevent payment which only you can put right i.e. damaged goods, wrong price charged and so on. On the other hand, an excuse implies there might even be a degree of untruth in what the customer is telling you.
I have already covered the importance of the sales invoice in a previous column. However, one way to avoid a valid query being raised is to ask yourself before invoicing if the work is complete, satisfactory, and in line with the requirements of the client’s needs and the contract of the works. If not, then don’t bill until these elements are in order!
Otherwise, any other response you receive indicating that payment is being withheld is likely to be an excuse and you have to deal with these immediately and professionally. For example, if a customer is withholding payment against the statement of account because they have query on one item you should request payment of all items they can agree for payment, request full details of query on the one invoice and promise to deal with this as a matter of urgency (and make sure you action!).
Another common ‘excuse’ is a request for another copy of the invoice. In this instance, don’t just send a copy of the invoice; firstly, check back on the account notes to see if they have used this tactic before (I accept the odd request will be bona fide). If so, raise the point with the customer and say this is not the first time you have requested another copy of an invoice and check you have the correct postal/email address for them. In my experience, this stops them using this excuse again.
How many of you have been faced with the response “we are waiting for payment from our customer”? If this happens, you need to be polite but firm and explain to them that what they are saying is irrelevant to you as trading terms (including payment terms) were agreed and the customer is responsible for finding the funds to pay on time. After all, you are not operating a ‘pay when paid’ policy.
Other excuses that formed part of our discussion included responses such as “we are changing banks,” “we are going through a re-organisation” and “there is no-one available to authorise payment.” In all of these instances, I would recommend that you are not fobbed off. Do not accept everything said by the customer at face value. You should ask further questions about how their critical suppliers and staff are being paid while the bank account is changed or how long will the company re-organise take. More importantly, obtain the name of the person who is temporarily in charge during these changes or while staff are absent. Every business will have designated someone to be in control of key decision-making and to cover emergencies.
These are only a few examples of excuses, but I would be interested to hear of any excuses you have been given as to why a client is unable to make payment. In the meantime, I will leave you with my tip to build up a bank of business-like responses which you can use when customers offer excuses/reasons for not being able to make payment.
Kevin Artlett FCICM
Pecunia (2016) Limited
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