Whether it's a client who continuously submits late payments or a one-timer who completely ghosts you, dealing with a non-paying customer can be stressful.
Ultimately, you're responsible for following up until you receive the money you're owed, and doing so may even require taking legal action. However, there are tactful and professional ways to handle customers who don't pay their bill. We detail common reasons why customers miss a payment, provide different options to pursue and list helpful tips to prevent non-payments from happening in the future.
Common reasons why customers don't pay
There are many reasons why a customer or client chooses not to pay their invoices. Here are three common reasons clients give when they miss a payment:
- Low priority: Your customers might have more important bills or debts to cover than yours. If it's a matter of paying rent or keeping the lights on, they'll ensure those payment deadlines are met before yours.
- No repercussions: If you've been lenient with late payments in the past, some customers may take advantage of your kindness.
- Tough times: Sometimes, a customer is simply enduring a difficult financial time and cannot meet your payment deadline as originally anticipated. In this case, it may be more difficult to collect your payment.
What to do if a customer doesn't pay
If you have sent payment reminders, follow-up emails and phone calls, and the client still hasn't paid their invoice, consider these options before moving forward:
- Consider whether further action is worth it. If the missed payment is relatively small, you might not want to waste time or resources on further action. However, if the payment is a major chunk of your yearly income, it's worth getting help from an attorney or collection agency.
- Talk to a lawyer. If nothing you're doing to receive your payment is working, get an attorney involved. They'll recommend which legal courses of action you should take against your employee, and ensure you're adhering to any relevant laws or regulations (like the Fair Debt Collection Practices Act).
- Talk to a collection agency. Collection agencies collect your debt for you. Do some research to find a reputable one for your business.
Whatever you decide to do, make sure all your communications with the client are polite, professional and non-threatening.
6 tips to prevent non-payments
Want to make sure your customers never miss a payment deadline? Here are some tips for preventing non-payments:
- Research your new prospects. Just like your customers likely evaluate your company before doing business with you, you should research your prospective clients before offering them your services.
- Discuss payment terms upfront. Make sure to detail all projected costs from the start, including installment fees and deadlines.
- Send invoices immediately. Give your clients ample time to pay you by sending invoices and billing for work upfront.
- Accept payments online. The more flexible you are, the easier it will be for your customers to pay you on time. By accepting digital payments, you're accommodating those customers who prefer using popular apps like Venmo or PayPal.
- Send reminders and follow-ups. If it's close to or past deadline and someone still hasn't paid you, don't hesitate to reach out to them. Often, the person genuinely forgot about a deadline and simply needed the reminder.
- Work with a factoring company. Factoring companies pay you immediately following an invoice, using it as collateral. Then, when the client themselves pay the invoice, the transaction will be officially closed.
While you can't control a customer's decision to not pay you, you can follow these tips to help customers avoid late or missed payment deadlines.