What to Do About Late Paying Customers

When Customers Don’t Pay on Time

Late payments are more than a cash flow inconvenience, they’re a leading cause of business failure. When customers don’t pay on time, companies risk a domino effect: strained supplier relationships, missed payroll, halted growth. 

And it’s happening more often. According to S&P Global Market Intelligence, “the number of U.S. corporate bankruptcy filings exceeded 100 in March 2023, the highest monthly total since the early days of the pandemic.” That’s a warning sign: even large, established firms are defaulting. 

If you’re dealing with slow-paying or delinquent customers, now is the time to rethink your risk strategy. This article breaks down practical steps to handle late payments—and how trade credit insurance can shield you from serious losses. 

Explore our trade credit insurance solutions to reduce your exposure. 

Late Payments Are a Growing Problem 

Businesses extend credit as a gesture of trust. But in a volatile economy, trust doesn’t always pay the bills. 

Industries like manufacturing, wholesale, and distribution operate on thin margins and rely on prompt payment to keep operations running. When a key customer pays 30, 60, or even 90 days late, it disrupts everything from inventory cycles to payroll. 

In fact, Trade Finance Global highlights that “57% of SMEs report that late payments have a significant impact on their operations,” with many struggling to access working capital due to overdue receivables. 

So what can you do when clients don’t pay on time? 

Step 1: Tighten Your Credit Terms and Invoicing Process 

It starts with discipline. Too often, late payments trace back to weak internal controls. 

• Use clear payment terms. Spell out net payment deadlines, late fees, and escalation protocols in every contract and invoice. 
• Send invoices immediately. Automate this step to avoid delays. 
• Follow up consistently. Don’t wait until day 60 to make your first call. Have a structured reminder system in place. 

If the issue persists, don’t ignore it. Early intervention is critical. 

Step 2: Communicate and Escalate Professionally 

Sometimes, a simple email or call can resolve the issue. Other times, you need to escalate: 

• Call the customer’s AP or CFO directly. Keep the tone factual and professional. 
• Offer structured repayment options—but set clear deadlines. 
• Pause further credit sales until the balance is resolved. 
• Engage a collections agency if necessary, but weigh the reputational and financial cost. 

These actions help regain control—but they don’t guarantee payment. 

Step 3: Protect Your Receivables with Trade Credit Insurance 

Even well-run companies can default. A fire, fraud, customer bankruptcy, any of these can lead to non-payment. That’s where trade credit insurance comes in. 

Trade credit insurance protects your receivables by covering losses due to protracted default or insolvency. If a customer can’t (or won’t) pay, your insurer steps in. 

This type of coverage is especially valuable for companies selling on open account terms, domestically or internationally. For a visual overview, watch the video below: 

Bonus: Many policies come with risk monitoring and collections support, so you’re not flying blind. 

Business Benefits of Managing Late Payments Proactively 

• Reduce risk of bad debt write-offs 
• Improve cash flow reliability 
• Support more confident sales growth 
• Avoid reputational damage from aggressive collections 
• Access customer credit insights from your insurer 
• Strengthen lender relationships by securing receivables 

Conclusion 

Late payments are a fact of life in business, but major losses don’t have to be. 

From tightening credit controls to insuring receivables, businesses have tools to reduce risk and improve resilience. 

Contact us today to learn how we can help protect your business. You can also explore our trade credit insurance solutions to start reducing exposure now. 

FAQs 

What should I do if a customer is consistently late with payments?
Start with a structured reminder system, escalate communication, and consider suspending credit terms. You can also engage collections or consider credit insurance as a long-term safeguard. 

Is it worth offering payment plans to late-paying customers?
Yes—if the customer is otherwise reliable. Structure the terms carefully, include deadlines, and monitor adherence closely. 

Can trade credit insurance help with late payments?
Yes. It provides coverage for protracted defaults and protects against customer insolvency. Our guide to trade credit insurance breaks it down further.