Late payment strategy

Published on 17 September 2021 in Cash management

Message from France

What could be more annoying than a late payment? The work was done on time, the service rendered was of excellent quality, the goods delivered on time and in accordance with the order, and the customer does not meet his obligations. He confronts you with a new delay in payment. The larger the order, the more this delay in payment will play on your nerves. You've paid your suppliers, your employees and your utilities, and your cash flow is starting to suffer from late payment. Your banker is showing signs of impatience. How to react?

Reactions are often inappropriate. When faced with late payment from a major customer, suppliers tend to be patient. We're not going to upset a major customer who might not take kindly to a reminder, as he's about to place a new order that our company needs. To avoid a new war between sales and administration, the watchword will be patience. He'll pay in the end, and he's always paid. This is a strategic error. Either there is an administrative problem (wrong addressee, change of contact person, unprocessed claim), in which case patience is justified in the face of late payment, or there is no dispute, in which case impatience is the order of the day.

In the weeks following the agreed due date, impatience is necessary; you have done your job to your customer to avoid late payment and to pay on time, as he has undertaken to do. Showing "polite" impatience when the deadline passes is the best way to guarantee that the bill will be paid. A customer who's always late with payments and thinks you're his banker doesn't deserve you. Very often, a large part of your margin will be wiped out by this customer's behavior.

The delay in payment persists, and the company decides to take drastic action. For example, she'll call in a debt collection company, and then she'll be impatient. The company will expect immediate results from the debt collection company, and won't understand why after a few days there's no result, when they themselves have had no result after several weeks of effort. This is yet another strategic error. When you've decided to give late payment a contentious aspect, when an assignment has been entrusted to a debt collection company, you need to be patient. The procedures are lengthy, the regulatory requirements tedious. When you're involved in a dispute, you need to be patient. If your claim is justified, and unless the person who owes you money goes bankrupt, patience will pay off when litigation is initiated.

When the person who owes you money is abroad, the attitude of patience and impatience in the face of late payment is exacerbated, and must be implemented in the same way, i.e. impatience as soon as the due date has passed, and patience in the event of a dispute.

Georges Vonfelt


Back to list