5 Debtor Excuses for NOT Paying & What To Do

First and foremost – be sure you are not in the wrong. Be 100% confident you have delivered the work as agreed and the invoice you sent out is error free; – be sure any payment delay is not actually because of some problem you have initiated.
Have you delivered on time? Did the product/service live up to the standard expected? Was there good customer service follow-up?
Don’t expect your clients to pay your bills on time if you didn’t stick to your word and do what was agreed either.
If the reason for the payment delay is a genuine quality problem, an error in the invoice, or some other mistake or issue at your end, it should be quickly addressed and rectified with an agreement for prompt payment. You probably wouldn’t pay a bill with errors or for goods or services that are not what you needed or wanted – so don’t expect your customers to be any different.
Next, understand the type of debtors you have and start responding and even anticipating their excuses to really improve your cashflow. Although there are 5 Debtor Excuses I have broken these down into two groups, according to the best solution required.

A. Messy Debtor Excuses

This group are not ill intentioned, they are a bit messy in how they run their own worlds, and that mess can impact your business if you don’t watch out. They are easily resolved by putting in place great systems and procedures at your end, your efficiency will thwart this groups’ standard excuses for not paying.

1. CARELESS DEBTORS

If the client ‘forgot’ to pay the invoice or did not understand the firm’s trading terms – then this is partly your fault for not making what you expect clear enough. It is very important to set your business rules from the beginning, before you even start work, and preferably as you are making your pitch. If you are not making your payment terms clear, and then giving prompts and reminders to reiterate your terms it is all too easy for any debtor to genuinely forget your invoice is due.

2. DISORGANISED DEBTORS

Some people are truly inefficient, with chaotic money management that means they only pay creditors “once they start chasing us”. If you do not have a reliable system of invoicing on time, sending regular and timely prompts and reminders to reiterate your terms these debtors will simply not know your invoice is due.

B. Mean Debtor Excuses

These next three ‘excuses’ are a bit trickier because this group of Debtors are intentionally treating your business as an interest-free banking facility and can go as far as abusing your business; these excuses are less like a ‘reason’ and more like a ‘delay tactic’. All of the following excuses are best resolved by tackling the relationship and type communications you have with these debtors.

3. ‘BROKE’ DEBTORS

Things happen, and sometimes cash becomes scarce… But someone else’s problem shouldn’t necessarily be yours as well. When you are initially discussing the deal listen carefully to your customers’ specific constraints, values or any requirements they are likely to need you to comply with. Ask questions and then listen; steer the conversation around to how prosperous things are for the client, delve into their intent or habits about paying on time… People who are slow payers will most likely be slow in paying you too, and if you know this early you can negotiate accordingly.

4. UNCONCERNED DEBTORS

These customers are ‘too busy’ to worry about the overdue invoices. You are interrupting their ‘important work’ when you phone them about it, and that attitude is not helpful to your good ongoing professional relationship. Again, stay aware of how they relate to you during your preliminary discussions, and any ‘habits’ they may have around not paying on time.

5. DISHONEST DEBTORS

Some people are not GOOD, and will contract you with no intention of ever paying you. Don’t let debtors like these get cause your business problems – by acting quickly, stopping further work and if necessary taking legal action, you can make sure your business is not damaged. Don’t if you believe a debtor is dishonest then remember you don’t actually have a customer/supplier relationship; you have become a benefactor of their business because in their mind you are DONATING them your time, goods and services – so you’re probably better off without them.

A. Messy Debtor Solutions- Have Great Systems

Use this solution for:

1. Careless Debtors
2. Disorganised Debtors

Having really good systems and processes at your end will go a long way to preventing these two excuses impacting your business.

Great Systems help support your cashflow

Set the rules of the game and then insist everyone follows them – improved control over your invoicing leads to healthier cashflow.

Use very clear terms and conditions AND REPEAT THEM – regularly remind your customers of what you are expecting. Hand your payment terms to customers when you do the quote, print a copy of your payment terms on the back of your invoice, re-send payment terms with your invoice reminders. Establishing a clear policy and communicating how you expect everyone to stick to your policies leaves little room for careless and disorganised excuses.
For quicker payments, set-up multiple payment methods – use EFT, PayPal and other electronic payments. Highlight all these opportunities to pay in your terms and on invoices and make it as easy as possible for your clients (and giving them less reasons for excuses).
Post AND Email your Invoices – Emailing reduces the risk of delay, or the “lost in the post excuse” – but you can end up with your invoice in the in-box of someone on leave. Snail-mail is more difficult for you to monitor when it was received and opened, but it seems a piece of paper is harder to ignore than an email.
Create an Incentive– using a small discount for on-time payment can be a great way to hurry things up. Large electricity companies have been doing this for years. A 1 – 3% discount is probably less than the cost of funding and chasing your overdue debts and therefore money will spent upfront.
Include some peer pressure– include a note on your invoices saying something like “80% of our customers take advantage of our on-time payment discount – this keeps our debt collections and bad debt costs low which keeps our prices down for everyone.” You may be surprised what a bit of peer pressure can do.
Be methodical – consistency is the key here, so stick to the same approach for debt collection each time you invoice. An example Collection Pathway might look like:
- Known Careless and Disorganised Debtors: at 2 days before due issue an SMS reminder, or email: “A quick note to let you know your invoice is due tomorrow and remind you to take advantage of our “pay on time” discount”
- All Debtors: at 5 days overdue, re-email the invoice, with a reminder call: “this is a courtesy call to say you have unfortunately missed the “pay on time discount”, however if you pay in full by COB today we will do xyz (this can be a choice of continue work, or not charge any late fees, etc)”

Having a slightly uncomfortable conversation about money and payment upfront is much much easier (and gets even easier with practice) than having a really difficult conversation about an overdue debt! You WILL be worse off if you make a “sale” to someone who takes your stuff and never pays you for it!
These first two reasons are not too hard to sort out. The “careless” and the “disorganised” merely need prompt and regular actioning from you and your team to make sure there excuses are foiled.

B. Mean Debtor Solutions – Have Great Communications and Relationships

Use this solution for:

3. ‘Broke’ Debtors
4. Unconcerned Debtors
5. Dishonest Debtors

People pay the people they like first – not the fairest side of human nature, but a true one, and one that you can easily work with to your advantage simply by being nice! You may not be able to collect every invoice, but you can go a long way to limiting the impact that bad payers have on your business.
On the flip side these debtors are not honouring your rules of business, and hence are starting to damage your relationship and

possibly your business – it may be wise to de-prioritise any further requests from these customers so your cashflow remains protected, or add a ‘slow payer surcharge’ into any future quotes and prices.

Great Relationships help prevent cash delays

Use these communication tips and then insist everyone follows them – this will help your debtors continue to see your business as both reasonable and also not to be taken advantage of.
NOTE: The suggested Collection Pathway below is “no nonsense”, your approach will work best if it is tailored to suit your clients and business style. However, to get your existing customers back into line, and solve some of your current +90 day issues but you probably need to take a heavier handed approach initially, just until new habits are established by your team and your debtors.

Create some communication scripts and timetables for overdue bills – regularly remind your customers you are expecting payment. It may seem odd to be reading from a script, but there is some very key wording in here that can significantly increase your collection success; – scripts help you and your collection staff build these specific terms into your interactions and get you your money sooner.
- 10 days overdue make a debtors call using this script: “Hi I’m sure you know our terms require payment within 30 days and you have now had our invoice for 40 days – I’m calling to reiterate that slow payers make it more expensive for us to run our business which leads to price rises; and I am sure you don’t want to be the cause of our next price rise… So I am ringing you to help you settle this in full now, over the phone.” If they give an excuse “I can’t pay the full amount right now” be very quick to answer with “Well – how much are you short?”
- 15 days overdue make a debtors call using this script: “Hi I’m sure you know our terms require payment within 30 days and you have now had our invoice for 45 days – as it appears to us that you are struggling to meet your commitments, rather than creating more stress on your business we have decided to offer you a payment plan… How much are you short each week?”
- +30 days overdue – send a statement, include a covering letter with the intention to hand the invoice over to a debt collector or collection agency within the next 30 days. You may also want to repeat the offer made at 15 days.
- +60 days overdue – hand over to a debt collector or collection agency
Do not at any stage offer any extra discount for full or quick payment unless both these apply: i) you think you have a very low chance of collecting this debt and you do not want to put any more effort into it, AND ii) you are not intending to do business with these people again. Offering a discount for full payment on an overdue invoice is REWARDING you debtor for paying late, and setting up the expectations that in the future late payment well also lead to another discount. Discounts should be negotiated up-front as part of the deal, not tacked on at the end, if you do discount to collect cash, make it clear that is the end of your business relationship (or change your prices for this customer next time to “build-in” an amount to offset any discount expectations….
Be punctual about reminders, debtors calls etc; show your customers you are in business and mean business. Keeping good file notes about the debtors calls – include, at a minimum for every call: date, time, name and title of the person spoken to and the exact details of every conversation also prevents any misunderstandings and minimises push-back and the runaround when collecting debts from larger organisations. Set your business up for success by using every aspect continually across your client dealings.

It will take a bit of practice to adjust your language, improve your processes and to be confident when you need to be persuasive. There’s no magic to collecting money but a few moments spent updating your strategies for different types of Debtor Excuses will pay dividends in terms of prompter invoice payments and less hassle.

Looking for more Debtors Help?

The best question to prompt a late payer – ‘How much are you short?’

CLIENT: “I can’t pay the full amount right now”
YOU: “Well – how much are you short?”
People generally wont lie to you, nor will they want to lose face and say “I don’t have any money at all”, and often they haven’t been asked this question before so it will probably catch them off-guard and prompt an honest answer. By understanding what they can’t afford to pay you become very clear about what they can pay right now, which of course you are able to collect on the spot.
I have used this approach when things have gotten “serious” and it always works a treat.
For more details on changing your communication see 3 tips to Increase the Flow

A bad debtor is not a good customer

Don’t be afraid to walk away it is better to have no customers and spend your time building a good pipeline than DONATING your efforts for non-customers who WILL NEVER PAY!! Unfortunately late payers are common and chasing them is not fun!