Dealing With Clients Who Don’t Pay

pay-invoiceOne of the worst experiences any business owner or self-employed person can have is dealing with a client who fails to pay on time, or tries to avoid paying altogether. Small businesses are particularly vulnerable to a client who doesn’t pay, because a large percentage of monthly revenue may be lost as a result.

If you’ve had the unpleasant experience of a client who evades payment or would like to avoid this situation in your own business, here are some guidelines to ensure that your clients pay on time, and some steps you can take if they don’t pay:

Put Everything in Writing

From your invoicing, which should be thorough for tax purposes as well as the running of your business, to quotes, receipts, and all forms of communication you have with your client, make sure that your business documents are clear and accurate.

An order placed by one of your clients on the phone should be followed up with a quotation that the client must sign and return to you before any orders can be processed. Ideally, your client should provide you with a purchase order – this is documentary proof that they ordered the goods and services you agreed to supply them with.

Keep an Eye on the Details

In all your documents, make sure that the goods and services supplied are mentioned clearly. Also, ensure that the price per item and the total add up, and that these amounts do not change from one document to another. This thoroughness will help your case if you need to make a legal claim against one of your clients.

Make Your Terms Very Clear

When you send your invoices, ensure that your payment terms are very clearly stated. If your business is still growing or if you don’t want to stretch your cash flow without a good reason, you may want to consider asking for a deposit on certain orders. This is particularly important for goods (and services) which are produced to order.

Whether you operate on 14, 30, or 60 day payment terms, make sure that your client understands when payments are due. If you deal with larger companies which pay on certain dates of the month, adjust your invoices in line with these dates to ensure payment.

Dealing with Non-Payment

  • Clients who fail to pay should be reminded politely that their payment date has lapsed.
  • If they fail to pay within a few days of the notice, you may need to send a letter of demand or consult your lawyer for specialised advice.
  • Remember, it’s not worth losing a good client over a non-payment that happened by accident, but it’s also not worth losing revenue to a client who makes a habit of not paying.

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