You’ve done the job. You’ve sent your invoice. And now you’re being ghosted, and you have yet to determine when or even if you’re going to get paid.
Unfortunately, clients paying late or not paying at all is not uncommon, and it can affect businesses of all sizes – no one is immune.
To help mitigate these situations, we’ve pulled together some of our top tips on what to do if a client won’t pay. Ensuring that you get paid on time, every time, and if you do face a late payment, you have the right tools and processes to help you achieve a successful collection.
In addition, make sure to check out our `debt collection service page` for a range of collection services to support your commercial collection requirements.
What can you do when the customer won’t pay
Research your clients – for all new clients, it may be prudent to carry out a little bit of background research, checking credit history, testimonials etc. Trust us, it’s always good to know who you’re working with.
Set expectations – from the very beginning. Having contracts in place allows you to outline clear payment terms and conditions, detailing the work, costs, and when you expect payment. You can also include in your contract potential late payment charges and interest if deadlines aren’t met. Ultimately, contracts can provide an added element of security for both parties. Remember to keep agreements and payment terms simple and transparent.
Make contact – as soon as an invoice becomes overdue, make contact with your customer. Email is often the preferred choice, where you can explain that payment is now overdue, and you can reattach the invoice for reference. We would also advise you to include information in the email about payment options and how you are available if they need to speak to you about payment options/issues.
Use `stop` – if you have persistent late payers, putting them on stop and refusing them additional products or services until they have settled their invoice can be highly effective. It can also stop debts from building up and getting out of control.
Speak to the right person – it’s important to make sure that you’re sending invoices and requests for payment to the right person. Invoices passed around departments or individuals only delay payment further, and the worst-case scenario is that your invoice gets lost altogether.
Have robust credit control processes in place – what do you do when an invoice becomes overdue? What are your options if a customer won’t pay? For example, are you in regular contact with your customers, checking that the invoice has been received, follow-up phone calls and emails to follow up after the payment due date has passed, chase letters, etc.? Regular communication is key to anticipating payment problems in the future.
Don’t go too strong too fast – often, invoices can be misplaced, lost in a pile of paperwork, and more – sometimes, it can be right to give your customers the benefit of the doubt. Allowing a little leeway at certain times can be beneficial to your business and client relationship.
Try a range of communication tools – if email isn’t working, then it’s time to try a different tack. Remember, you can also contact clients via phone and letter. You can even look to speak to different members of staff, for example, the accounts department or CEO/Managing Director.
Charge interest on late payments – you are legally entitled to charge statutory interest (calculated at 8%) plus the Bank of England base rate on overdue business-to-business debts.
Offer early payment options – if you’re in a position to offer early payment discounts, this can be a great way to incentivise and encourage prompt payment.
Ask for a deposit – for larger projects, it is not uncommon to ask for a deposit to secure the work, providing businesses with security and a boost to their cash flow.
Work with a professional debt collector – third-party debt collection agencies, like Direct Route, have a very successful collection rate. Having tried and proven techniques in place for late payment of commercial debts, debt collection agencies can save you considerable time, recouping money that is owed to you effectively and efficiently. Sometimes just knowing the debt is now in the hands of a debt collection agency is enough to prompt quick payment.
Options if a client won’t pay
Every situation is different and therefore requires a different approach to handling.
This is where we can help.
We work with you and your credit control team to ensure successful collections. Helping to keep your cash flowing, contact us today to learn more about the range of available debt collection services and how we can help.
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