What to do when a client doesn’t pay
What to do When a Client Doesn’t Pay
In high street retail and most ‘point of sale’ businesses, purchases are settled upfront.
In this instance, if a payment does is not made, then the customer will not get the product.
However, most of those not in this sphere of the industry operates on a ‘goods and services first, invoice after’ basis.
Most business’s present payment terms to their clients before the beginning of an agreement.
These terms discuss payment dates, obligations and penalties should an unpaid invoice occur.
Typically customers are given 30, 60 or 90 days to settle their invoices.
If they are not paid, business owners can often be left in a very difficult position.
In the modern business world, a rising number of businesses are experiencing financial distress.
This is down to the fact that they aren’t able to pay due to tightened cash flow.
There are also those clients who simply refuse to pay, affecting a businesses cash flow.
If outstanding balances are not addresses quickly an entire business can be put at risk.
In this article, our debt recovery experts explain the possible reasons as to why a client may be refusing to pay.
As well as this, they provide some free advice on what business owners can do when a client doesn’t pay.
Reasons Why a Client Doesn’t Pay
In the business world, there are many reasons why payment dates might be missed.
When this happens, it is important to understand the reasons before taking action.
Acting too strongly may cause more problems than being owed money.
There will be a certain amount of late payers that have just forgotten due to being busy or badly organised.
A quick reminder to this type of customer will usually resolve the issue.
What then, if despite a more than reasonable amount of time has passed, you’re just not getting anywhere?
A common way in which clients may not make a payment on time.is when they begin to dispute a payment or an invoice.
This could be for a legitimate reason, and it is important to contact the client regarding the issue.
In most cases, a payment dispute can be resolved quickly and easily, and all outstanding balances can be resolved.
However, some clients may use this as a tactic to delay payments.
What to do When a Client Doesn’t Pay – Take action
Many small business owners have clients that promise on numerous occasions to pay an unpaid invoice.
It is common for them to fail to do so, and if this happens it is better to consider professional assistance.
Often, business owners spend more time chasing those that don’t pay as opposed to clients that ‘do pay.
Whilst this can be effective in some cases, it is common for too much time to be wasted chasing unpaid invoices.
This is instead of spending time working on value-based tasks that grow the business.
If your business intuition tells you that the matter is not going to be sorted…
…then a professional debt collection agency is the right option for you and your business.
Writing a Letter Before Action
Many business owners choose to send a reminder advising that they will take ‘further action.
This is sometimes known as a letter before action or a payment demand letter.
The first letter should always be polite and professional in tone.
It should also remind the client of their payment dates and obligations.
If this does not result in the client paying their bill, this may be enough to trigger a response.
If this is unsuccessful, it is appropriate to send a more firm letter that announces your intent to escalate the matter.
Again, this should be professional, but should also clearly state that you intend to take action if payment is not made.
A common letter before action in England and Wales will announce legal action through a small claims court.
Whilst this is a popular approach, court action is not necessarily the best debt recovery option available.
Legal advice can be very expensive, and some solicitors will charge large amounts for each hour they work on a case.
A more beneficial option is to talk to a reputable debt collection firm that will be more than happy to assist.
Instructing a Professional Debt Recovery Agency
A professional reputable firm represents a far more time and cost-efficient method of recovering your owed monies.
Business owners may feel a little hesitant when considering this option.
This is can be understood, as many small business owners view debt recovery as a last resort.
However, that may be before they have really understood what a modern professional collection agency like Federal Management does.
Federal Management regulated by the Financial Conduct Authority (FCA).
As such, we will only ever act on your behalf in a very polite, but firm manner.
A professional business to business debt collection company such as Federal Management will never act unlawfully or intimidate a customer.
This could risk tarnishing your reputation as a company.
With this in mind, it is wise to think smart when choosing a debt collection agency to work with.
It is always in the interests of everyone concerned that an agreement is reached amicably.
If a client misses payment dates regularly. it is imperative for it to take the appropriate action as soon as possible.
Never Write Off Bad Debts
Is your business encountering issues when a client doesn’t pay?
If so, writing a debt off should never be an option, no matter what the circumstances are.
A debt collection agency could just be the solution to the problem.
Speak with one of our friendly debt collection experts and talk through your options.
A debt recovery agent will conduct a free debt assessment of your case.
This will determine how viable it is that the debt can be recovered.
It will also provide you with a clear picture of your options.