How to manage late payment situations with corporate clients
(Because if you've done the work, it shouldn't be difficult to get paid..!)
Each month I hear from people who are thinking about selling their services to corporate clients as coaches, consultants, speakers, trainers or done-for-you service providers.
And one of the biggest questions that comes up?
‘But doesn’t it take ages for corporate companies to pay suppliers?’
Now, today’s read isn’t just about how long it takes companies to pay suppliers - because that’s a whole other article in itself! But I do think that it’s relevant… especially when we start digging into the world of late payments and how we can resolve those situations.
Ten years ago, it was common practice for large organisations to have extended payment terms - meaning that they’d often pay 30/60/ 90 or even 120 days after an invoice had been submitted and approved. Which… wasn’t great for small business owners and their cashflow.
But - after a couple of financial crises (and one pandemic) small suppliers began to realise just how frustrating (and financially challenging) these long payment terms were, and began setting their own payment terms to get paid more quickly by companies.
(And in 2021, we saw the Prompt Payment Code being launched in the UK to support small businesses being paid on time!)
Which is why, in a world where large organisations often have more access to capital, have certain requirements to meet around payments and when they’re actively using the services that are being supplied… it can be even more frustrating when they just don’t pay you on time.
So what can we do?
Firstly, it’s important to note that in the B2B world, late payments are not the norm. I often hear people saying things like ‘Oh big companies take forever to pay’ - and if you don’t pay attention to this article, then you might find that you are operating to longer payment terms.
But unlike the B2C world where I’ve seen and heard of people;
Randomly cancel PayPal/ Stripe subscriptions to courses that they’ve bought but no longer want to pay for.
Sign T&Cs for software/ courses/ coaching/ other services to say that they’ll pay the full amount… and then don’t…
Decide to make false chargeback claims against services that have already been provided
Companies make their payments.
Now, before the handful of unicorns on the internet who haven’t been paid by a company for a service that they’ve provided, all jump into the comments… let’s just take a second to step back and see why 99% of the time companies will pay their suppliers - and what causes the 1% or so of circumstances that stop payments going ahead.
When most people think about organisations not paying suppliers, they usually fall into one of two camps:
Emotional: ‘This company hasn’t paid me on time… they’re never going to pay me… how unfair….’ and so on.
Logical: ‘I wonder why this company hasn’t paid me yet… what can I do to support my invoice in getting paid by DATE?’
Needless to say, it’s easier for one thought process to get paid quicker than the other.
You see, there’s one simple way of ensuring you always get paid for the work you do with corporate clients.
Signed contracts.
That’s right. Most small suppliers go through their sales process feeling like they’re definitely going to win the business. In some cases, we can get overexcited; spending the money in our heads before the deal even goes through.
But - a painful lesson from my optimistic, early twenties sales self - a deal is not a deal until a contract is signed.
Even if the client is nice.
Even if you really like them.
Even if they’ve said on the phone/ zoom/ by text that they '‘think it’ll definitely go ahead!’
Until the (digital) ink is on the contract? The deal is not done.
Now I’m not a lawyer and you shouldn’t look to me for any kind of legal advice. (Instead, I recommend Suzanne Dibble and her legal templates to stay safe) What I do know about good contracts though, is that they protect both parties during any delivery of services down the line… and that they protect your payment terms too.
If you have a tight set of terms and conditions that you get your corporate clients to sign before working with you, that make specific reference to areas like; payment terms/ cancellation clauses/ force majeure etc, then you have little to fear on the late payments front. Equally, if you decide to work with an organisation and operate by their T&Cs (and get them looked over by a legal representative to make sure your interests are protected!) then it’s quite likely that you’ll have clear payment terms and guidelines. 1
But - even with signed contracts, some service providers find it really difficult to prevent, monitor and manage late payment situations. So, let’s look at the most likely scenarios and how you can manage them differently.
Late Payment Scenario 1: Your stakeholder hasn’t signed off your invoice
Stakeholders always have the best intentions around new suppliers - and often want to do their best with regards to getting you paid. But, life happens. They get busy/ go on holiday/ are sick… and your invoice is just stuck in their inbox, waiting to be approved and forwarded to finance. What do you do?
Prevention is always better than cure: During your sales process, it’s really helpful to get an introduction (at the point of the deal being signed) to a point of contact in the Finance division. That way, you always have a point of contact in the department that will ultimately pay you - and can take some of the pressure off of your stakeholder if they are off sick/ finance needs any further information/ etc.
If your stakeholder is out of the office (and there’s no clear timeline on their return) it’s useful to reach out to other stakeholders that could support you. I teach my clients to build relationships with multiple internal champions throughout the sales process… so that if your original stakeholder is busy/ leaves/ is sick, you’ll be able to navigate all areas of delivery (including payment problems) smoothly. Ask another internal champion to introduce you to the Finance department and see what they can do.
If your stakeholder is on holiday / has a clearly defined time period for returning/ you don’t have a relationship with the finance department: Wait. It’s annoying and frustrating - but if you want to maintain the relationship and they haven’t got your invoice approved before they go on holiday and you don’t have any other relationships internally? It’s best to wait until they’re back - and then ask if they’re able to get it paid any earlier.
Late Payment Scenario 2: Your client booked the work, signed the contract and now wants to pause/ delay services unexpectedly.
This happens - sometimes companies have timelines that change or priorities that change unexpectedly. In this situation, you really need to go back to your terms and conditions and see if you’ve got cancellation or postponement clauses that you can work with. Sometimes situations do change for organisations - but it doesn’t mean that you don’t have to be paid (especially if you’ve already started the work/ done prep/ allocated time in your calendar or even been told at late notice and now can’t fill the space with other clients.) Please always refer to your terms and conditions here so that you are protected - and remember, this is a business situation and not a personal one.
Whilst stakeholders might love for you to waive cancellation/ delay fees, it doesn’t mean that you should/ should have to. Suppliers often worry that if they enforce cancellation/ delay fees that a relationship will be ‘ruined’… but a) depending on the way that you communicate, that doesn’t have to be the case and b) there will always be other opportunities to build other relationships / rebuild ones that have become strained. Getting paid is important and is not wrong/ greedy/ selfish or difficult.
Other things to consider in this situation:
Getting a clear timeline from your stakeholder on when work will restart so that you can bookmark time in your calendar
Being transparent about any changes in timelines and what that may mean for future delivery (for example, if you already have bookings that will make delivery more challenging at later periods.)
How you can support them to make future decisions about bookings and identify any red-flag situations/ potential areas of difficulty for delivery for other opportunities.
Late Payment Scenario 3: The client just hasn’t paid… and you don’t know why.
My least favourite of all the scenarios. Sometimes, you can do everything right in your sales process;
Support them in getting clarity around the issue(s) that their organisation is facing and create a solution that meets the need.
Create a proposal that articulates the solution, transformation and outlines the pricing and scope of work.
Get terms and conditions signed that give clear payment terms/ instructions.
Be introduced to a point of contact in the finance/ procurement teams to make sure that you have all the correct billing information.
Deliver/ start delivering a great service and submit your invoice correctly to the right point of contact, using the correct purchase order number/ information.
And for whatever reason?
The client just doesn’t pay on time. And they don’t tell you why.
Now - I’ve been in sales for a long time and I can tell you that there are common reasons that corporate clients don’t pay on time - and then seemingly ghost you.
Your stakeholder is embarrassed: Imagine how awkward it is when you’ve got a supplier who is good, helpful and delivering great results… and knowing that they haven’t been paid? Your stakeholder is likely embarrassed (and working behind the scenes) and hoping that you’ll get paid soon.
Your stakeholder spent a budget that they didn’t really have access to: Sometimes stakeholders (and it’s very unusual) can sign off projects/ programmes that the budget wasn’t fully/ finally allocated for yet. It doesn’t mean that you won’t get paid - but it can mean that it’ll take time to iron out (and that they’re getting yelled at by procurement in the background!)
They’re busy: Sometimes stakeholders have done the right things on their side (getting your invoices to finance contacts / approving them) and for whatever reason, it hasn’t been paid and they’re just too busy to email you about it. This is terrible communication on behalf of the stakeholder - and not a great experience as a supplier - but it also doesn’t mean that you won’t get paid or that you shouldn’t continue to chase the stakeholder politely for more information.
So what do we do in a situation where we’ve done all the right things but the client hasn’t paid and isn’t communicating?
Review our T&Cs: I know, T&Cs are a big feature in this article but there’s a reason for it! Review your terms and conditions (specifically around payments) so that you can check if payment delays incur interest/ late fees.
Send a clear email to your stakeholder: To alert them that the payment is late and that (if applicable) late fees are now being applied and will continue to be applied until the invoice is paid. You can do this in a polite and friendly way - you don’t have to be aggressive or rude - just be clear.
If there’s no response: I say to my clients that there are three emails that I send around late payments on the odd occasions that they crop up; friendly - the first email that alerts them that a payment is overdue and gives a friendly reminder about the due date / asks if they can chase it, formal - an email letting the stakeholder (and finance point of contact) know that it’s overdue, that late fees are being applied and sets a clear expectation for the payment being made and final - the final email that I’ll send, outlining late fees and sent to the stakeholder and finance contact before it would go to external collection agents.
(And no… I’ve never had to go to an external collections agency to get paid by a corporate client.)
Things to remember…
Late payments can often be prevented when working with corporate clients. Things like; having a clear sales process + managing expectations around payment terms, having clear contracts that outline payment terms or cancellation clauses, getting introductions to other points of contact who make the payments process more simple, can all really help to avoid late payment situations altogether.
Corporate clients do pay: As I mentioned earlier, I’ve had a few corporate clients over the years who’ve been a bit late on paying invoices. Sometimes my stakeholders have been on holiday or they’ve needed to pause work due to unexpected new priorities… but I’ve never not been paid by a corporate client.
Stay positive: If you’ve done all the right things and have good terms and conditions in place, always operate from a positive standpoint. Payments can feel like a tricky area but most of the time? Everyone wants a quick and easy resolution (because no-one likes awkward conversations!)
Stay clear, concise and courteous in late payment communications: Simply put, shouting all over social media about an ‘awful company that hasn’t paid my invoice’ isn’t appropriate. And nor is being rude in any follow up communications around late payment - even if your stakeholder is being a little Casper-esque! Be polite, clear and concise in all payment communications and you’ll often find that you get a much better outcome (and that you’re much less stressed too!)
Be confident to enforce and uphold your terms and conditions: This is business… it’s not a personal slight. If corporate clients are late on their payments, it’s not because they hate you/ hate working with you/ think you’re rubbish. Equally, it’s not personal on your end either… so don’t be afraid to uphold your terms and conditions and implement late fees or any other clauses your terms and conditions contain.
Check out your government rules/ regulations: Some countries have clear regulations around chasing late payments. The UK for example, has very clear guidance on chasing commercial payments and being able to add late fees or debt recovery costs, so make sure you check out regulations in your area to see if there is additional help or support available.
And - if you’re in The C Suite ®? Remember, that you can use the exact templates that I use to follow up on late payments with corporate clients by going into the resource portal so that you don’t have to overthink or worry about any communications around late/ delayed payments.
Finally, whilst late payments can happen when you’re working with corporate clients, please remember that it is not the norm. You shouldn’t be put off of working with companies because you’re scared about payments. With the help of a good sales process and clear communication, you’ll be absolutely fine :)
Please note that this article is not giving legal guidance or advice and that you should always consult a legal professional before signing any contracts.