Late payment is one of the leading causes of business failure. When the cash stops flowing, many firms, even profitable ones, can be forced out of business.
Being given the run-around by a customer that owes you money is enough to raise the blood pressure of any business owner, and social media has made it easier than ever to vent your frustrations.
Sole trader Trevor Tierney was so frustrated by late payments that he has established a website 60days.com where, for a fee, SME’s can ‘name and shame’ customers who do not pay up within the agreed or standard payment terms.
With a recent survey revealing that the number of late payments experienced by UK businesses hit a two year high in 2015, it is perhaps unsuprising that there has been considerable discussion online about naming and shaming of late paying clients, but is it a good idea?
While it might feel good to get your own back on customers that don't pay their invoices on time, perhaps justifying it as a public-spirited warning to others, it is often best practise to keep the problem private and look at other options to chase for payment behind the scenes.
There may be a genuine reason for the payment being late such as the invoices is in dispute or that it hasn’t been received. Before speaking out you need to make certain you have checked that these options are not a reason!
By speaking out you could be accused of damaging a client’s reputation. For example it was reported recently that a freelancer who used Twitter to name and shame a Qatar-based company was hit with a legal claim for defamation running to £120,000. You also run the risk of damaging your own reputation and relationships with other clients. After all who wants to deal with a business that takes to twitter to rant about their clients?
The Office of Fair Trading advises against using social networks to pursue debts - and warns that doing so could be seen as harassment of the customer. In guidance aimed at debt collection companies, the OFT lists "unfair or improper practices" including "posting messages on social networking sites in a way that might potentially reveal that an identifiable person is being pursued for the repayment of a debt". Whilst this guidance is aimed at consumer debt collection practices, it does highlight the perils of naming and shaming and that you should take the time to think before posting any such messages.
My Credit Controllers does not recommend naming and shaming. We believe that it is counterproductive and almost certain to harden positions and significantly reduce the chance of collecting an overdue payment. Credit control has never been so vital for the financial health of your company. If you have a problem with a late payment, instead seek professional outside help from a specialist company.
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