A Guide to Dealing with Customers Who Refuse to Pay Their Bill

A Guide to Dealing with Customers who Refuse to Pay Their Bill main

As a business owner, few things in life are as frustrating as waiting for payment on goods or services rendered. When this happens, it’s easy to feel more pressure about how you’re going to obtain any of the money that’s owed.

Small business owners in particular can find issues like this to be challenging. After all, sometimes the prompt payment of a bill can be the difference between a smooth running business and a rough month that hinders your company’s progress.

More often than not, a customer has simply forgotten to pay up, and will happily do so after a reminder. But what action can you take if an invoice is still outstanding after several reminders, and how can you prevent this issue from occurring ever again?

Read our comprehensive guide to dealing with customers who refuse to pay a due bill to learn more.

Polite reminders

This should always be your first step after sending out an invoice. Again, most late payments are down to simple oversights with no malice intended whatsoever, so with luck, this first step will resolve the issue fast.

A polite “just checking you’re happy with your goods/services” email can remind a client that their bill needs to be paid without you having to overtly mention it. Instead, reminding a customer of a due invoice can be mentioned as part of a friendly message about their happiness and satisfaction.

Send an updated invoice

If a polite message hasn’t resulted in prompt payment, then it’s always worth sending over an updated invoice. This serves two purposes, as it removes the chance for a customer to claim that they have misplaced the bill while reminding them of the payment that’s due.

Reassess your side of the process

Before being more direct and firm with your insistence on payment, it’s important to double-check your side of the invoice and ensure that you’ve billed them correctly.

If you discover that there’s a fault on your end, or that there’s any customer dissatisfaction with the quality of your products or services, issuing a swift credit note with an apology can help to straighten out the problem.

You must reassess your side of the process before the steps listed below to avoid any potential embarrassment to your business.

Set a deadline for payment

If you’ve now sent out two emails or calls with no confirmation of when you can expect a payment, it’s time for you to be firm. It doesn’t matter how big of a client it is, or the ongoing basis of your business relationship, you’re going to have to send a very clear ultimatum.

Send a message that contains the following pieces of information:

● The number of times you’ve contacted them over this matter
● The dates that you contacted the customer about it
● The number of days the bill has been due for
● A specific date for when any services will be stopped
● A clear deadline for when you expect to be paid

This is usually the final motivator that causes a customer to take action and pay up. But for added effect, you could also attach a copy of your initial contract and highlight their failure to adhere to it.

A Guide to Dealing with Customers who Refuse to Pay Their Bill

Consider using a factoring or debt collection service

If the steps you’ve taken above prove ineffective, and your business needs the monies owed as soon as possible, it may be time to enlist the services of an invoice factoring service.

How does this kind of service work? You’ll sell off the accounts receivable in question in exchange for a percentage of its value (anything from 75-90%). You’ll be sent the money as an advance within a matter of days, while the factoring service collects from the customer. You’ll then get the rest of the funds, minus the agreed fees.

Finally, if all else fails, the situation may require a professional debt collection company to handle it on your behalf. The majority of collection agencies will handle all of the subsequent customer communications and get your company the monies owed as soon as possible.

Preventing the issue from happening again in the future

Once you’ve been burned by a difficult payment situation, you may look at ways for your business to prevent it from ever happening again. And while it’s perfectly understandable to want to implement some stricter rules for due payments, it’s important to keep the door open for communication, understanding, and good relationships with your customers.

Here are the 3 most effective ways of achieving all of these things at once:

1. Establish payment terms upfront

Enter into an agreement with a customer by setting clear expectations about start dates, projected costs, and terms of payment. You can set up a very straightforward agreement that keeps everyone on the same page in a respectful manner.

Most customers prefer to work with a company that’s trustworthy and fully prepared, so use this as an opportunity to showcase your business’s diligence and how seriously you take each job.

2. Implement late fee penalties

Extenuating circumstances may cause a customer to be a little late with the occasional payment. And if you know and trust them, that’s perfectly fine. But as a general rule, it’s better to protect the needs of your business by including penalties for late payments.

Use the guide below as inspiration to create your own specific late fees policy as part of your terms of service:

● A written warning for payments up to 5 days late
● A small additional fee for payments up to 10 days late
● An additional larger late fee for payments up to 15 days late
● A full stoppage of all services after 21 days of non-payment

3. Offer some flexibility on payment options

In some cases, there may be situations where a customer has some unexpected financial problems and can’t afford to pay their invoices all at once. Ideally, this would be a rare scenario, but if this should happen, it’s always best to have a few flexible payment options available to fall back on.

If you can agree on a monthly payment amount that’s doable for you and affordable for the customer, you can maintain a potentially prosperous future relationship while getting your owed money back at the same time.

The line between firm and fair

In times when a late payment is causing your small business a lot of unnecessary stress, it’s important to take stock of what your options are, how you can go about rectifying the issue, and how you can prevent the issue from ever happening again.

When you run out of options and have no other choice, there may be times when taking a client to a small claims court feels like the only solution left. But this can be a long and drawn-out process at times, where the effort to get that due invoice can sometimes cost you even more time, energy, and money.

For SMEs, this isn’t always a viable option. But if you ensure that you enter into every new business relationship with clear and concise rules about payment, late fees, and the importance of being paid for a job well done, you can walk that fine line between firm and fair, and generate some strong partnerships in the process.


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