Tips for Handling Non-Paying Customers

Tips for umgang Non-Paying CustomersCredit Goodmorning3am/Shutterstock If your business operates on an invoicing ordnungsprinzip, you might be familiar with late payments and perhaps even nonpayment. There are many reasons why this happens, from senfgas bills to unexpected additional expenses that the customer could leid afford. However, regardless of the circumstances, an unpaid invoice can hurt your business. You need to act if you want to receive your money.According to Greg Waldorf, CEO of invoicing app Invoice2go, you want to deal with the problem head-on, but being straightforward doesnt have to mean being aggressive. If a client or customer hasnt paid a bill on time, heres how to ensure that you not only get your payment, but also maintain a good relationship with the customer.You can never guarantee that every single customer will pay a bill on time, but there are things you can do to keep late or missed payments to a minimum in the future.1. Disc uss all costs and payment terms before you begin a project.Putting everything on the table right away not only sets payment expectations for your client, but also builds the trust necessary for a strong, positive customer relationship, Waldorf said. Before diving into a project, make sure that your client is fully aware of projected costs, and ensure that you take time to answer any questions upfront.Having this clarity from the beginning will help strengthen customers trust and commitment to paying the full amount, Waldorf said. If anything changes along the way, alert your customers in real time so there arent any surprises.You should also set up a system that is backed by a policy or terms of service. For instance, if you dont pay within five days, you get a warning 10 days, you get a late fee 20 days, you lose service, suggested Ben Giordano, owner and founder of FreshySites.Editors Note Looking for a collection agency for your business? If youre looking for information to help you choose the one thats right for you, use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free2. Bill for work upfront.If you think its too risky to use an invoice system, ask for full payment before starting any work. Mat OFlynn, co-owner of Gilded Agency, said that the only way to mitigate nonpayments is to bill for the work upfront.Some consumers may be wary of submitting payments before receiving work its a two-way street. To provide some reassurance, encourage them to read testimonials or reach out to previous customers.If you have a spotless track record and take care of clients consistently over time, you will earn mora and more right to take payment prior to work, said Giordano. When someone questions our policy, I tell them to call any of our clients, any day, anytime, and ask about our reputation and integrity as an organization.You can also charge a deposit before starting any work, turning down cus tomers who dont seem like a good fit. This is often evident from the start if there is an issue with down payments, there will likely be issues with future invoices.If a client refuses to pay a deposit, then I immediately know not to work with that client, even if they beg you to later on, said OFlynn.3. Send invoices right away.With so many tasks on your plate as a small business owner, it can be easy to lose track of a customer invoice. You may even to forget to send one in the first place, and going after a client for payment on a bill you never sent will only hurt your reputation. Waldorf advised sending your invoice as soon as a job is completed and staying on top of it until its closed out to avoid falling behind.4. Be in zeit und ewigkeit with late customers.If a customer wont answer electronic correspondences about their bill, call them and keep calling every day until they pay.Dont be aggressive just dont stop asking, said Hunter Hoffmann, head of U.S. communications for small business insurer Hiscox. Emphasize that you want to settle up the accounts so you can both focus on more important things. It will become much easier for them to pay you than to keep dodging your calls and making excuses.What if customers wont pay?A friendly reminder that a customers bill is past due is the first step in collecting your payment. Most of the time, a late payment was an honest mistake, and receiving that first follow-up will make a client pay as soon as possible. Waldorf noted that the subject of money isnt always easy to address, so you may want to ease into the topic.Use an opportunity to check in on a customers satisfaction for your services, and then discuss any approaching or past-due invoices, Waldorf said.In some cases, clients will try to delay payment by saying they lost the bill, or that they need to reconcile their records to find the correct payment amount, Hoffmann said. If this is the case, Hoffmann advised sending an updated invoice right away e ven if you know the customer has the original to take away this excuse.If your client still wont pay, be open to hearing their reasons.Giordano suggested asking questions about their satisfaction with your work, their financial complexities and anything that might contribute to their refusal to pay.Once you know why they refuse to pay, you can work towards a resolution with the client/customer, said Giordano. Keep in mind that everyone is just a person, and rarely is someone actually out to hurt the other most people are logical and willing to work towards a solution if you provide them with the opportunity to do so.When a nonpaying client ignores your emails and calls about the invoice, demand payment a little more firmly. Service businesses working with the client on an ongoing basis are in the best position to give an ultimatum, Hoffmann said.platzdeckchen a specific deadline when service will be cut off to light a fire under them, Hoffmann told geschftlicher umgang nachrichten sendung Daily. Its amazing how quickly they can figure out how to pay when they realize how hard it will be to replace your service in a couple days.Waldorf advised requesting a timeline for payment and continuing to follow up until the customer pays. If necessary, resend your original contract, indicating that you will escalate the situation if invoices remain past due.Bringing in outside helpIf repeated attempts to contact the customer and collect your payment have failed, its time to call in backup. Here are three options to help you get the money youre due.Factoring services If youre strapped for cash and dont know when a customer will send their payment, a factoring service may be able help you get the money you need while youre waiting. With a factoring service, you sell your accounts receivable to a company for a certain percentage of the accounts value (usually 70 to 90 percent), and that company will advance you most of that money within a few days. Then, it will collect yo ur customers payments and send the rest of the cash to you, negativ the service fee.Keep in mind that factoring services are not collection agencies (see below), and they will run a credit check on your customers before agreeing to purchase their invoices. If you use a factor for multiple customers invoices, the service fees will add up, and you may end up losing money in the long run. To learn more about using a factoring service, visit Business News Dailys guide.Collection agencies A debt collection agency is a company that specializes in recovering payments that are typically more than 90 days past due. The company will take the task of following up with the customer off of your hands, using tried-and-true tactics to get the individual to pay. This Business News Daily article contains more information on when and how to hire a collection agency.Attorneys While you can file a lawsuit against a customer who wont pay up, the time and money associated with suing a nonpaying client ar e not worth it for most small businesses.We do a very honest cost analysis when considering a lawsuit, said Giordano. Is the total cost (financial, emotional, time, energy, etc.) greater than the amount to be recovered?If its more work to recover the $500 than its worth, just learn the lesson, put in a system so it doesnt happen again, and move on.However, if that client owes you a large sum of money and refuses to pay you or a collection agency based on the terms of your contract or invoice, a lawsuit may be necessary. If you do decide to pursue legal action, consult with an attorney to determine how to proceed.Additional reporting by Nicole Fallon. Some source interviews were conducted for a previous version of this article. Sammi Caramela Sammi Caramela has always loved words. When she isnt working as a Business.com and Business News Daily staff writer, shes wri ting (and furiously editing) her first novel, reading a YA book with a third cup of coffee, or attending local pop-punk concerts. Sammi loves hearing from readers - so dont hesitate to reach out Check out her short stories in Night Light Haunted Tales of Terror, which is sold on Amazon. 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