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Have you ever been hit by a late payment and not sure how to handle the delicate situation to make sure you collect your payment and maintain a good customer relationship?

Even the best customers and businesses can become late payers for a whole range of reasons, which can be beyond their control. When this happens, it can put a strain on both the customer and supplier, which can damage the entire business relationship and even lead to non-payment.

To prevent late payment turning into non-payment, which can culminate in lengthy and expensive proceedings as well as the breaking down of relations, you should:

  1. Avoid making the situation worse
  2. Maintain open communication with customers
  3. Understand the customer’s perspective
  4. Use an intermediary, like Allianz Trade

Stay calm. Don’t put too much pressure on your customer. Although your worries are completely understandable, pushing your customers is not usually constructive, (especially if things may not be 100% in their control), and could result in a clash.

Don’t harass your client. Harassing looks like calling a customer every single morning for 60 straight days and screaming at them. Persistence looks like calling every seven to ten days and giving the client options by which they can start paying off the debt.

Don’t overplay an emotional connection. It can lead to later payments for supplier and customers who know each other as the customer may take advantage of this. What’s more, be very cautious about threatening with legal proceedings as this is unhealthy for the long-term relationship.

Lack of communication between customer and supplier is often a root cause of tension surrounding payments. For customers, the most common reason behind late payment is cash flow problems, and they will often take an insular stance on this as there are feelings of shame around it. Customers may avoid calls or reminders, not always through conscious choice, as they don’t want to share their cash flow issues or find it hard to manage. They often have no other way of settling an unpaid invoice in compliance with initial terms, and you need to communicate with your client on this.

Make sure you document everything. Every time you talk to a client on the phone, follow the conversation by sending an email with the details of what you agreed. Certify and copy every letter you send in the mail and save email correspondence. 

Cash flow issues, and therefore late payments, can be linked to a range of issues from cash flow management problems to market conditions or late payment from one of their customers. There may be a legitimate dispute over the order, but delaying full payment without informing the supplier of the issue, is not legitimate. To help find a solution for late payment you need to understand the root cause.

Learn more about strategic customer credit management for late payments.

A third party intermediary has no emotional attachment to the situation, so the intermediary can act calmly and neutrally to get to a solution quicker. Not only will this save you time and possibly allow for better results, but it could keep you out of legal trouble.

An intermediary, like Allianz Trade trade credit insurer, can demonstrate openness and listen to the customer pinpointing the source of the problem. Collectors explain they are there to find a credit solution, explaining the position of the supplier and that they do not intend to act as the customer’s bank. Customers understand these arguments and don’t make the same promises to an intermediary as they do to a supplier they know, especially when the intermediary is of Euler Hemes’ size.

The third party is there to find an amicable solution with a preference for out-of-court negotiation, which is beneficial for both collecting money and maintaining a commercial relationship. They are there to find win-win solutions; for example; disputes can be recorded and reported back to the supplier and cash flow issues can be scheduled to reasonable proportions.

Late payments from customers don’t have to be the end of your finances or the relationship. Taking these simple steps can help you find a payment solution and maintain a good customer relationship.

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What is export credit insurance? Export credit insurance helps companies remain competitive by offering open terms when letters of credit or prepayment may have previously been the only safe way to do business. In fact, foreign companies buy an average of 40 percent more when they are offered open terms, according to the World Trade Organization. Export credit insurance providers protect your sales from political risks, including import/export changes and foreign government intervention. Few companies can effectively compete without extending credit to their buyers. For exporters, getting trade credit insurance levels the global playing field. Working with new countries means dealing with new cultures and new opportunities to access new markets and customers. Businesses must know to manage the associated credit risks that come with exporting products or services.