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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?

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0

I've had this problem with so many of my clients. What worked for me was putting an early payment bonus on the invoice. So for example, if the client pays their invoice within 7 days they pay 5% less - it gives the clients an extra incentive to pay quicker and they nearly always do!

I hope this has helped resolve your issue!

Jack from Office Cleaning Nottingham

0

The best way is to lay out the payment terms from the start. I'm not suggesting that you haven't done this but when you are nervous about alienating a client, it's easy to let them slip. Once you've established the "pain" of why the client needs your services, explain the terms in detail.

6

Hi Colette,

Unfortunately, dealing with late or non-paying clients is a common challenge for small business owners. This question is asked in the community so often, that the Business.com team went looking for the definitive answer on how to handle a situation like this. You can see what they advise in this recently published guide on How to Handle Non-Paying Clients.

First, it's best to take precautions before agreeing to work with a new client. Research the client, write up a contract and ask for a portion of the payment upfront. You don't need to be a legal expert to write a simple contract. There are several free templates online that you can download for an exchange of services contract. However, if your business transaction is more complicated than that, I do recommend having a legal consultant review the agreement before asking clients to sign anything.

Despite the best preventative methods, you are still likely to face clients who are not willing to pay for the services rendered. The Business.com guide will advise you on how to approach clients like this in a professional manner.

Anonymous User
0

This is a huge problem for me too

0

Know when you have to "fire" a client. I have a current client who's average days to pay invoices runs 63 days. Over 90% of my income from this client was payed after the due date, and mostly because I spent additional time with calls and letters and suspending future work until those invoices were paid.

Cutting ties and terminating an ongoing contract with a habitual late-payer is the best way to get their attention and start the conversation when normal methods seem to fall on deaf ears or are met with excuses. Once the conversation is started, explain why late payments affect your business and your productivity. For my business, 75% of my expenses are payroll. "Dear Client, I have an obligation to pay my employees weekly. When I have to wait for invoices to be paid for 6-8 weeks, I'm still providing my employees a paycheck for the time they've spent on your project. If my expenses for the month are $20,000, and $15,000 of that is payroll, you can understand how your unpaid bill of $2,000 can really strain my business when it doesn't arrive for over 60 days, can't you?"

What I have found is that slow-paying clients are slow, not because they can't make the payment, but because this behavior is tolerated! Just like parenting a child, if they can get away with bad behavior, then they will continue to behave badly. Providing them alternate methods of payment is a bandage. DEMANDING timely payment is the cure!

0

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0

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.

Anonymous User
0

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0

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.

0

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.

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