9 Things to Do When Your Clients Refuse to Pay You

9 Things to Do When Your Clients Refuse to Pay You

As a small business owner, you rely on clients to provide capital for the goods and services you provide. What happens when one of them has an overdue invoice and you have reminded them time and time again of their debt?

Here are a few steps you can take to take matters into your hands:

Do Background Checks

Even before working with a potential client, do some research and perform a background check. See if this person has a good track record for paying on time or has had issues with other local businesses.

Set Everything on Paper

Let’s say you want to set a deal with a client. You like them, and you think that they would make an awesome business partner. Before anything else, draw a contract that protects both you and the concerned party.

Everything that the transaction entails should be included in the contract – what you will provide, how often and the quantity, how you expect to be paid, and so on. It would also be wise to include your Terms and Conditions (link) when a client’s invoice hasn’t been paid yet for a specific time. Discuss such things in person and include it in the contract. In the event that you need to pursue legal action, the client is legally bound to abide by the contract.

Payment First

For small businesses, it is advisable to ask for a partial payment first before starting a project especially if it is a big one. You may break down the payment scheme into stages, and ask for payment when one ends and another begins. This way when the client hasn’t paid yet, you may stop working on it altogether.

Late Fees are Acceptable

As stated above, enlist in the contract any late fees that will incur when an invoice is left unpaid. Come up with a structure for late fees for each one of your clients and state it on the contract and the invoice. You may choose to charge a late fee in as little as 10 to 15 days after an invoice has been sent out.

Informing the client that a late fee will be added over and above the current invoice if it hasn’t been paid in the next 48 hours is within your prerogative and is only fair on your end. It is only reasonable that there is a proper exchange of goods/services and payment. Keep tabs of when any invoices haven’t been duly paid, even after reminders.

Don’t Limit Your Contact Methods

With so many ways to contact each other nowadays, some people still think that an email about an unpaid invoice is enough. If your reminder goes unnoticed, it’s time to try other contact methods.

Search for the company’s landline number or get in touch with another contact person within the organisation. If this doesn’t work, and you are within the same city as your client, it may be worth the trip to pay them a personal visit especially when the invoice has snowballed and is already months overdue.

Don’t Do Any More Work

Put your business (and yourself) first by simply stopping any work on a project that still has unpaid invoices. This is the beauty of breaking down the payments; in the event a client fails to pay up, you can halt all work until all accounts have been settled.

Regardless of their reason for paying in an untimely manner, even if a client has settled all invoices seriously think if it is still worth working with this person again or not. If the past project was more of a hassle to you and the business, it may not be worth your time and effort to work with them again. If you continue to transact with them, ask for half the payment upfront and then the other half before the project is delivered. For the meantime, search for clients that appreciate your service and actually pay on time.

Factoring is an Option

When you’ve been dealing with a stubborn client who hasn’t been paying for some time, approach a company that offers factoring: you sell your invoices and you get a portion of the payment back. While this may not sound ideal, it removes the hassle of running after an errant client.

Approach a Debt Collection Agency

If you believe that a particular transaction is still worth pursuing, enlist the help of a debt collection agency. Unlike a factoring company, a debt collection agency can still offer the possibility of getting the full invoice (plus late fees) from a client.

Seek Legal Action

When you’ve done all that you could, it may be time to bring matters to the court. However, many small businesses find this to be too expensive and time-consuming. If you know of a lawyer who charges a good rate for unpaid invoices, seek their assistance. For most people, a simple letter of a threat to pursue legal action is enough to get them to pay up.

Conclusion

JMA Credit Control has been in the business of debt collection for more than 50 years. We understand the predicament of our clients, and we do our best to make debt collection an easy and stress-free for all involved. Contact us for a free consultation and learn more about how you can effectively manage your finances for a better and brighter future.

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