What's the best way to deal with non-paying or late-paying clients?
I've recently had to deal with clients who pay extremely late or simply avoid paying us entirely. I'd like to try to avoid lawsuits, and I'd also like to maintain as positive a relationship as possible with my clients. What can I do to prevent late payments, and how can I deal with non-paying clients (before I resort to suing them)? What has worked for you, and what do you recommend?
If we are talking about existing clients, who are late payers (or do not pay), you may stop providing with services til they make the payments.If you have a new client and afraid that he won't pay - conclude an agreement. Taking the work only after payment is being made 100% in advance is a good option, by some clients won't like it.
Which is why I'd recommend devising such a scheme: do your work, but send it coded and do not deliver the source code until the client makes full payment. Anyway, you need to negotiate a contract with every client - it's your protection and guarantee.
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Upfront credit investigation is key relative to assurance of prompt payment . Most smaller businesses are reluctant to stop shipping or withhold services, but we can assure readers that large corporations have strict policies in place around delinquency . In todays environment numerous cash flow solutions around receivable financing can accelerate cash and not lose the client and sales opportunity.
Best way is to adopt no credit policy till a certain amount of business. Then you can extend credit say, Credit will be 10% of the amount party has paid in previous calendar year. For existing customers further credit will be extended in the ratio of reduced credit amount. Initially you may face some problem, but ultimately you will be comfortable.
I see that this question has solicited 99 answers so far and many brilliant thoughts have been already shared. My thoughts;
1. I never recommend confrontation, it takes away lot of energy.
2. Get the clients who pay you late and or avoid paying to recommend you.. Get them to refer you to more clients. Use them to market your offerings. They have an obligation to do that.
Hope this helps, while you keep following up on your bills.
Thank you for making answers for payment relating issues.
I am also a victim of having this kind of problems. At the moment, I'm dealing with a Russian customer and I am trying my best to get him in for establishing a business relationship but he is just replying that he only can do payment on COD. Could anybody help to understand the psychology of the Russian people and how we should convince them for even partial payments? Btw, I have already offered him to only pay half of the payment in advance because we are gonna make their customized products and they are very comfortable with our prices but they still insisting on COD
Please advise! Thank you
I know how frustrating it can be when clients don't pay promptly or don't pay at all. Unfortunately almost every company has debt and how you handle it is up to you. I work for a commercial collection agency we help collect past due accounts for our clients and help our clients maintain the positive relationship with the debtor. We work on a contingent basis so unless we collect you don't pay a penny!! Send me an email and if you or anyone says that they saw this post on mosaicHUB I will offer a discount.
Indeed the answers below are possible. but do not hesitate to contact me for organizing your credit management en recperation.
The first thing i would identify is the reason for Non Payment...Then bucket them as Voluntary and Involuntary.. Voluntary is wanting to default and Involuntary is default due to financial circumstances, service issue, forgetting to pay, bad accountant who just forgets to process the payment etc etc...The Voluntary bucket either needs to be legally handled incase the money is big or just left as Bad Debt incase the value is not significant enough and following up with that may burn more cash than what you end up gaining..
Involuntary Bucket needs to be handled depending on the reason , such as if the client is having Cash flow problems maybe giving leeway may help both sides and you never know tomorrow when he gets a good business he could be your major client.. Incase of forgetfulness ensure timely automated reminder just before payment dates ..Service issues needs to be handled carefully and would recommend you to give the benefit of doubt to customer..
Attempt to find out why. Sometimes it is because of a financial emergency (illness, lost of job) The person may want to pay but just cant at the amount promised Maybe arrangements can be made with the person. This will get you the money and good PR showing that you are human and can understand and work with people sometimes. Yes you cannot do the arrangements with all but some is better than none.