How to deal with late paying client who has cash flow problem

I've previously posted asking for advice in dealing with a regular client that I invoice monthly and always pays late. In the end I gave up trying to get them to pay on time as they always paid eventually, after some hassling and a week or two overdue.

This time they are a bit later than they usually are, and after some hassling and ignored emails, they have admitted to me that they simply don't have any money at the moment, saying they will pay as soon as possible, hopefully in another week. They told me they aren't in danger of going under but are merely waiting on a few big payments themselves.

I want to ensure I get paid ASAP, because (a) I need the money now, and (b) in the event they do go out of business, I want to have been paid. With this in mind, it seems like a good idea to start threatening late payment fees and/or debt collectors.

On the other hand, I don't want to sour the relationship, as I want their continued business, and am therefore minded to meekly put up with the delay. But if I don't give them much grief about it, they may put me to the back of the queue.

How best to deal with them?

And is it a very bad sign that they have cash flow problems (does it frequently presage bankruptcy) or is it not such a big deal? They are big enough that they must have a turnover of several million so I am surprised they can't pay me the few hundred pounds they owe.

 

Just stop there work, they will start to pay you automatically whenever they find that they aren't getting desired profits.

 

Dcmtr - Be sympathetic, it's counter-productive to threaten someone undergoing cashflow problems.

 

Ask for payment on weekly basis work if they still fail to pay you hold all of their work immediately.

 

I would just say, in my experience, that when it's a large-scale company paying late, it's not been cash-flow issues, but their feeling that they can dictate their own payment terms because of their size.

I always consider not just what the money is to me, but what that sum of money is to the client. Do they understand that, although it's a small invoice to them, it's an important one to you?

EDIT: I should say, I'm not calling your client a liar! I'm just saying, you know, their idea of no money might be different to yours. I'd debate if it's really that they can't pay you, or that they'd rather not.

I had a difficult time with a client recently, but the only solution that stands is to be in contact regularly, explain to them the importance of it, and literally ask whoever you deal with (accounts, or the contact) to help you get it paid.

For future reference it can be worth doing a credit-check before you get involved, although it's another expense. You can also elect to charge interest on late payments, which gets them moving!

 

It's a tricky balance, but ultimately you have to get the cash in for the work done as a priority over future work. Be sympathetic to a point, but don't be taken for a pushover. I also have more sympathy for a client who is experiencing temporary cashflow issues if they've always paid on time in the past and if they're open and willing to communicate.

I'm actually in the process of pursuing a client for non-payment. It's the first time I've had to go this route, but I've ended up outsourcing it to a company that specialises in credit control and debt recovery. While I have sympathy for the situation that this client has got to I'd be a lot more understanding if they would communicate openly and if they'd even just apologised in the first place. Ultimately it may even get to the stage of going to court and petitioning for insolvency. Hopefully that won't be the case - I'm still very much open to negotiating an acceptable payment plan if they wish to do so.

One thing that can help is to differentiate the sales process from the invoicing one. Ideally you'd have someone else chasing payment than dealing with the day to day client relationship. That way it's your 'accounts department' sending the payment demands and everyone else doesn't need to worry about harming the personal relationships. If you're a one man band that's tricky! Even having a separate email address can help though - setting up 'accounts@xyz.co.uk' for all the invoicing and payment chasing can allow you to distance that side of things from the process of getting the orders in and producing the work.

 

Have you considered sending a statutory demand? Non-payment of which can lead to a winding-up order.