Credit, Collections & Insolvency News
Chasing late payments can be a frustrating process, especially if you run a small business and rely on clients for your capital. Sometimes, there is a perfectly good explanation for a missed payment and a simple nudge is all that is needed to recoup the outstanding balance.
However, you may find there are times when clients refuse to pay altogether, even after you’ve sent several reminders. Insolvency practitioners Hudson Weir have put together ten options you may want to consider when your client refuses to pay.
1. Follow up invoices
There may be several reasons why a client hasn’t paid on time. Invoices may occasionally slip through the net, or a client may have simply forgotten about it. In these instances, a follow up invoice may do the trick.
Invoices should make it clear to the client how many days they have to settle the balance if you haven’t already agreed a payment date beforehand. If you don’t receive payment within this time frame, you are well within your rights to send a friendly follow up email.
Keeping track of any invoices you have sent and when they’ve been paid is a crucial part of keeping your business and its capital afloat. Send invoices as soon as work has been completed so that both you and your clients know where you stand.
2. Try a different means of contact
Establishing a different means of contact for your client can be advantageous when they are refusing to pay. If your follow up emails haven’t been acknowledged, pick up the phone and try to engage in a verbal conversation with them instead. This way you may be able to establish the reason behind any missed payments and resolve the issue more efficiently.
Alternatively, try reaching out to someone else within the same company, ideally a member of the same team as your client and see if they can help instead.
3. Try and talk through the issues
Whether there’s a problem on the client’s side or with the service you have provided,
finding an opportunity to talk through the issue can help both parties move forward.
It may be that the client is having a cash flow problem and is struggling to make a payment as opposed to refusing to pay at all.
Understanding the extent of a client’s struggles and coming up with an alternative payment plan can be achieved if you are willing to give them some leeway. Try to be as flexible as your business allows; late payments aren’t ideal, but they are better than no payment at all.
If the issue relates to the services you have provided, talk to your client about their expectations and why they are unhappy. Developing a rapport will help smooth over any problems in the future.
4. Stay calm and professional
If a client isn’t able to give you a reason as to why they haven’t yet paid, it’s important to stay level headed and calm. Clamping down heavy handedly on a client may make it even more difficult to recoup the money you are owed, so try and resolve the issue as professionally as possible before you take further action.
5. Charge late fees
Late fees should always be charged for unpaid invoices, especially if you are a small business and don’t have the time or resources to be chasing clients long after you have provided them with a service.
Try and allow the client some breathing space. Once the payment has been missed, and after a given time, gently warn the client that they will incur additional charges unless they pay their outstanding balance within 24 or 48 hours.
6. Refer back to the contract
Transparency is crucial, so be sure to put a contract in place with each client before you start working for them. Contracts should outline the client’s expectations, details of the work you have agreed to do, how much you will be charging and when payments are due. This way, you can refer clients back to the contract if your client is refusing to pay or disputing an invoice amount.
7. Down tools
If you are chasing invoices and haven’t managed to establish any communication with a client regarding their missed payment, cease working on their account until you have managed to speak to them.
In the future, consider invoicing your clients halfway through the agreement to put your mind at ease – a client is more likely to pay for services if they are waiting on completion. Some small businesses also charge a percentage upfront, particularly when working with new clients or on larger projects.
8. Use a collection agency
If you are spending more time chasing a client than you are securing new ones, you might want to consider taking a debt collection agency to do the legwork for you. Be mindful that these agencies charge a fee, but if your client owes you a considerable amount you may find it is one of the few remaining options.
9. Take legal action
As a last resort you may wish to instruct a solicitor, especially if you are a small business and are owed a large sum of money. Legal action can be expensive and time consuming, but often a letter from a solicitor carries more weight and can sometimes be enough to convince clients to pay what they owe.
10. Move onwards and upwards
On the odd occasion, it may be more beneficial to both you and your business to wipe off the debt owed from a particular client. In some cases, you may find you are spending more time and effort chasing a small amount of money when you could be earning more from another, more reliable client. If you decide this is the case, be sure never to work with the client again and take the time to research any future clients before you enter into any agreement with them.
Hasib Howlader, Director, Hudson Weir
