Client Is Refusing To Pay For Work Done

client-is-refusing-to-pay-for-work-done

Unfortunately dealing with clients who refuse to pay for product or services delivered is all too common. Every business owner who has been in the game for any significant amount of time will deal with customers who simply refuse to pay.

So what are your options when this happens and what can you do next time?

First off let me say that in my many years of experience as a debt recovery specialist I have found that prevention is always better than cure.

There are a number of steps you can take to protect your business from becoming a victim of dishonest and unethical customers who don’t pay their bills.

How To Prevent Unpaid Invoices

Often when you’re a small business, such as a plumber, you provide services before taking payment which can create a number of issues with outstanding payments from that point forward.

The simplest way to avoid unpaid invoices is to take payment upfront. Requiring payment before or on the day work is done or products delivered is a foolproof way to avoid bad debts. With portable credit card facilities available to most businesses these days you can take payment by credit or debit card either on the phone or person, avoiding any chance that you will not get paid.

But of course for some businesses and industries this just isn’t practical or accepted as the industry standard way of doing things.

So if you are expected to offer products and services on credit then you want to know exactly who you’re dealing with and that they have a good credit history. Running a credit history check is now simple, fast and affordable, with companies able to give you a full credit history report on a business or individual within the same day, it can often be much faster

This allows you to avoid offering credit to people with a long history of unpaid debts.

You can also request business references as a way to determine if this is someone you can trust to do business is.

Important Note
Far too often business owners will avoid running a credit history check because they believe that all new business is good business. But if you’re not careful you could get left with a massive loss simply because you failed to investigate a little deeper into the background of your customers.
You wouldn’t loan thousands of dollars to a complete stranger with no guarantee of repayment, yet when you offer credit to a new customer this is exactly what you are doing.  It’s only when it’s too late and you are thousands of dollars out of pocket that you understand the extreme risk of offering credit to unknown entities.

Legally Binding Terms Of Trade

Another great way to protect your interests is to draft up professionally written and legally binding terms of trade. Your terms of trade will explain in detail the terms of the transaction so that if you need to take legal action to recover funds you have a signed legal document to use as evidence.

Your terms of trade will cover when payment is required, what will happen if payment is not made on time, any interests costs on late payment, plus explain that the client will liable for any fees and costs associated with chasing up the unpaid debt. This may be the debt collection agency fee or legal costs if these steps are required.

It’s important to note that the customer is not automatically required to pay these costs unless they sign a contract that explains these terms.

Steps To Recover Unpaid Invoices

If you already have an outstanding debt or the above tips fail to protect you in the future then there are some best practices to follow to maximise your chances of being paid in full.

1. Automated Reminders:

Letting your customers know that you have your accounts in order and will quickly chase up overdue invoices is critical. Setting up an automated email reminder to be sent on the due date is a great first step to let them know, that you know, they have not yet made payment.

2. Start calling:

If the invoice remains unpaid after the due date and the friendly reminder email, you or your accounts department needs to call the clients and arrange for payment to be made.

Too often we have clients who feel bad about chasing up unpaid debts and fear it will ruin their business relationship. This is why having clearly set out and agreed upon terms of trade at the start of the transaction is so important.

If the expectations of both you and the customer are clear from the start you have no reason to feel bad if they do not meet their obligations.

3. Letter of Demand

If after an email and a phone call payment has still not been made then it is time to send a letter of demand. This is a final notice to the customer letting them know if payment is not made the debt will be referred to a debt collection agency and possibly the courts, and that it may affect their credit rating in the future.

4. Debt Collectors

If the letter of demand is not responded to and payment is still not made, hiring a professional collection agency is the next logical step. Over the years we’ve seen so many businesses write of debts that were easily recoverable if they’d just gotten some professional help.

Quality debt collectors will save you time, money and follow all the best practices and ethical standards to recover your debt, whilst maintaining the best possible relationship with your customer.

Established companies will even offer a “No Collection, No Fee” service so you only pay a % of the recovered funds as a debt collectors fee – and again if stated in your terms of trade your customer will be liable for these fees.

If you have a customer that is refusing to pay you should not hesitate to call a debt recovery agency. They’ll be able to give you professional advice and give you the best chance of recovering the outstanding money.

Written by Richard Thompson

Richard Thompson is the Managing Director and owner of JMA Credit Control and has over 25 years’ of trusted experience. Richard has a wealth of knowledge in Credit Management and Debt Recovery ensuring client’s recovery bad debt quickly and cost effectively.

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