How to Collect a Debt From a Client

How to Collect a Debt From a Client

Despite providing goods and services as promised, as well as great service, many businesses have to contend with clients that do not pay.

In some situations, there is a valid reason for this, but every business owner knows that there are always some people that refuse to pay no matter what.

Unfortunately, business debts are now a normal part of everyday life in a company. If left unchecked, non-paying clients can cause more and more problems for a business. A stable cash flow is extremely important, as it helps a company grow. If this is compromised in any way, the entire enterprise may be put at risk.

There are many ways to collect a debt from a client, such as instructing a professional debt collection agency. Businesses can also take steps themselves to help clients pay on time.

In this article, our debt collection experts have provided advice on how to collect debt from a client.

How to Collect Unpaid Invoices from Customers

If you have not been paid for providing goods or services, then there are certain steps you can take. Everyone that is entitled to be paid should be, and with these steps, you can make the most effective decisions.

Payment Terms

The best way to deal with debt is by preventing it from occurring, to begin with. It is common for businesses to require all new clients to agree to payment terms at the beginning of new arrangements.

These documents will provide the client with information on their payment obligations. This includes information such as amounts, due dates, and what may happen in the event of any outstanding debt.

The client is required to sign this document, and it is a good way to ensure that they understand their obligations from the start. If the client is hesitant or refuses to agree to these terms, it may be a sign that they did not intend to pay from the start.

Send a Reminder

If an invoice due date has passed and a client has missed a payment, the best thing to do is send a payment reminder.

We have covered the best ways to do this in an article dedicated to writing a debt collection letter.

Sending a letter is better than making phone calls or meeting the client in person, as there is a record of all communication between both the creditor and debtor.

Make it Easy to Pay

In some cases, the debtor may be experiencing financial difficulties. As such, they might not be able to pay the full amount of their debt at once. During the Covid-19 pandemic, this has been extremely common, with many businesses struggling to make ends meet.

If this is the case, it is always better to come to an arrangement with your client. For example, you may be able to create a payment plan for them, where they can pay what they owe to you in manageable instalments.

This is a very good debt recovery measure, as your client will most likely want to come back to you in the future after being treated fairly.

Contact a Professional

Despite the best processes and steps being taken, there will always be some clients that simply refuse to pay. If this happens, it is often better to contact a professional as soon as possible.

Many businesses choose to take legal action against their debtor, with court proceedings taking place in a county court. Whilst court action has historically been a common choice for businesses that are owed money, it is a very expensive and time-consuming method.

Instead, a professional commercial debt collection agency can recover your money. They provide a low cost and effective service for collecting all unpaid business debts.

Federal Management specialises in recovering commercial debt. For a free pre-action assessment of your case, speak to one of our friendly collections experts today.

How to Collect a Debt From a Client – Frequently Asked Questions