Business Owners Toolbox Blog Discussions and articles to help the small business owner solve the challenges they face as they grow their business.

March 12, 2017

Collecting from Late-Paying Clients

Filed under: Finances — Tags: , , , — Mike Van Horn @ 3:06 pm

Q. What’s the best way to deal with non-paying or late-paying clients?
I’d like to try to avoid lawsuits, and I’d also like to maintain a positive relationship.

A. Here are a few ways to deal with late paying clients:

1. Set up an account on Paypal or Square, or a credit card merchant account, so that they can pay when the service is performed. Or even earlier, e.g., when they book your services.

2. Get a prepayment or a deposit.

3. If you invoice, specify your terms in writing.

4. Call as soon as a payment is overdue. If your term is “net 30” and they haven’t paid by day 31, give them a reminder call. “We didn’t receive your payment. When can I expect that? Can I get a credit card number to handle that?” The one who asks gets paid. The longer you let it go, the harder it is to get paid.

5. Ask if there were any difficulties. Were they unhappy with your work? Was something not complete? How could that be corrected?

If they don’t pay, here’s a sequence a steps you should take:

1st.  Have somebody else besides yourself call, who is friendly but firm, and will not be sidetracked by sad stories and excuses.

2nd. Send a letter.

3rd. Send an attorney letter.

4th. For an ongoing customer, say, “We will be glad to continue our work for you when we receive payment.”

5th. Take them to small claims court. Much easier than filing a lawsuit. Getting a summons to appear in court shakes many old payments loose.

“Maintaining a positive relationship” with somebody who is purposefully withholding money they owe you should not deter you from taking forceful steps.

On the other hand, if they don’t have any money, or you can see you’re not likely to get paid, and it’s not a huge sum, then let it go. Don’t make your life about this issue.

But don’t do business with them again.

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