Got past-due clients at your agency who are late on their invoices? Fixing this requires both short-term and long-term solutions.
Why your past-due clients pay your agency late
In my experience, clients tend to pay agencies late for one of three reasons:
- incompetence at paying invoices on time (because they don’t understand their company’s accounting process),
- unwillingness to pay (because they dispute what you delivered), or
- inability to pay (because they don’t have the money)
Fixing the first cause comes down to helping them be more efficient—and recruiting the client company’s accounting department to help you remind your client contact. See below.
The second solution comes down meeting the client’s expectations and—if assuming you didn’t screw up in the first place—to your willingness to withhold new work until their account is current again.
The third solution comes down to setting up a payment plan while throttling-back new work. More on that below.
How to collect from past-due clients
Short-term, you—or your account services or operations people—need to figure out how to collect, now. Don’t be desperate—that doesn’t solve the problem.
The key is to put yourself in your past-due clients’ shoes, and then use that to get the result you want.
Recruit the client’s accounting department. Your client’s accounting team wants to pay bills on time. If your client isn’t getting Accounts Payable the invoices, send a duplicate copy of the invoice to the accounting department. When you introduce this new policy to your client, frame it as making their life easier (so they don’t see it as you going behind their back).
Do their job for them. One of my clients was dealing with a particular client who insisted on paying by check… yet their check signer was away for a couple weeks. The agency was waiting on a $30,000 payment for work it had successfully completed that the client had happily approved. I recommended sending the agency client’s accounting department a pre-printed overnight FedEx label. It worked… totally worth $30 to get that $30,000 check in time to cover payroll.
Be the squeaky wheel. Don’t overdo it, but if the client’s accounting department knows you’re going to keep calling (diplomatically!), they’re going to pay you before the vendor who lets things get three months past-due before sending a gentle letter.
Offer a payment plan. If the client has trouble with bills, offer an installment plan. Payment plans aren’t ideal—considering you already gave them time to pay—but it’s better to get some money than no money. I did this with an e-tailer when I was at an agency—after a slow sales period, they agreed to pay us in installments to catch up. We could see they had money coming in again, so it made sense.
Threaten to cut off service. This is never ideal—you want to try the other options first—but if it’s clear the client isn’t going to pay you, you may not have any other choice. Do consider that if they rely on your services to get revenue (e.g., web hosting for an e-commerce site), this may be a nuclear option. But also consider—if you knew the past-due clients were never going to pay you, would you keep providing them further services? No, you’d stop the damage immediately.
Question: How does your agency collect from past-due clients?