"I can’t believe, after all I did for them, they still refuse to pay!”
This frustrating phrase is uttered by thousands of business owners every day.
The sad reality is that there are people who take advantage of every offer you offer them. But when it comes time to pay up, they refuse to do so. It hurts and it’s frustrating. They’ll have an excuse, of course, but the bottom line is, you’re not getting paid.
The first step in dealing with a client who won’t pay up is to figure out WHY.
There are three main reasons why a client won’t pay:
1. The client doesn’t have the money.
2. The client isn’t happy with the service.
3. The client wants to spend the money they owe you on something else.
Once you know why they refuse to pay, you can work towards a resolution with your client.
How do you collect money from a client?
Reach out with a reminder.
Sometimes, clients honestly forget to pay, he may be out-of-town or dealing with an emergency. Letters are a polite way to remind customers of payments they may have overlooked.
Create a standard form letter you can use in each situation; since it’s a standard letter, customers aren't likely to take it personally. If people honestly forgot, they will take out their credit cards or checkbooks and send the payment.
Pay attention to Wording
It is important to come across as polite and professional while wording your invoice. Friendly phrases like ‘Please make the payment on time’, ‘Kindly pay your invoice within XX days’ and ‘Thank you for availing our service’ can increase the payment probability by more than 5%. Politeness creates a positive image of the company and increases the likelihood of getting paid on time.
Before getting angry, send a polite follow up email to check in. Many times, a “Just checking in” email can get the invoice paid.
Ask for the Payment in an Email (example)
Hope everything is going well. I just wanted to check in to make sure that you received my previous invoice for [date]. I hadn’t heard from you and wanted to make sure there weren’t any issues on my end.
If you need anything else from me, please let me know.
Thanks for your time!
A second follow-up email is totally appropriate if you still haven’t heard back after three business days. Be firm yet maintain a positive tone:
Just following up again on the previously noted invoice: I tried getting in touch a few days ago and still haven’t heard back from you.
As per our agreement, invoices are expected to be paid within [x] days. Please let me know if there are any issues and when I should expect to receive payment.
The “better to be kind than to be right” approach.
A customer may encounter a hard time paying their invoice because they just don’t have the money, but they’re too ashamed to admit it. When this happens, some customers will just stop responding to your emails.
Instead of letting the debtor know how angry you are, which may be very tempting, consider taking the “speak softly” approach. In your email, let your customer know that if they are having a difficult time paying their invoice, they should reach out to you and you can help them by working on an installment plan that they can afford.
It’s better to not make your customer feel bad or guilty for missing the invoice due date.
Many things can happen to your customers. Maybe they got sick or they suddenly found themselves dealing with a personal problem that derailed their ability to promptly pay you. As a business owner, you can make a lot more headway in these situations if you show a little empathy and make accommodations for your clients when possible.
After all, it isn’t just great customer service; it’s about being compassionate.
Make a Phone Call to get Invoices Paid
As time goes by and you still haven't heard from your client or received a payment, it’s time to get on the phone. Phone calls are harder to ignore than letters and in many cases, speaking to you can spur a client to spill the beans about what’s really preventing them from paying.
Pay attention to ensure you are being friendly but professional and stay firm.
You might consider to have someone from your accounts receivable department call the late-payer and try to determine the cause. If you don't have an "accounts receivable department" have a spouse, secretary or bookkeeper play the role. If the customer is the one you want to keep and is worth keeping, using such an intermediary will make it easier to maintain a good working relationship with the customer after the bills get paid.
Before you dial a customer’s number to follow up on an unpaid invoice, take a moment to prepare yourself.
In order for any call to be effective you need to have relevant supporting information readily available to ensure the call is efficient, professional, and productive.
Make sure to keep in front of you the invoice(s) you are calling about, notes from prior contacts plus any supporting documentation (proof of delivery, purchase order, etc.)
Prepare yourself mentally
Being asked for money, especially when it’s rightfully owed, puts your customer in an awkward position - they may find themselves struggling to justify the unjustifiable. As long as you maintain a sense of polite professionalism, and deal only in facts, the conversation cannot spiral into an aggressive, emotional, or personal place.
Some of the most common excuses for not paying would be some of the following.
We didn’t receive your invoice or the invoice is incorrect. When your customer is using some of these excuses, stay on the phone with them while you send another email and confirm with them when they have received it.
Similarly, If your client is using an excuse such as; The invoice hasn’t been approved, determine who is involved and what actions will spur your customers to release payment.
Demand Payment Firmer.
When a non-paying client ignores your emails and calls about the invoice, demand payment a little more firm.
I already tried you a couple of times but did not hear back.
When can I expect the payments?
Looking forward to your timely response.
Send a Certified Letter
Sending a certified letter will sometimes get your clients attention, additionally it can help you prove your case if you have to take legal action down the road. Make copies of the letter or invoice before you send it and keep a record on file. The client will have to sign for the letter to receive it so you will have proof that you attempted to collect the debt.
Offer Installment Payments, if Necessary.
Ideally you want to get all your money back. If your client is having a financial problem, an installment plan is often the best option for accomplishing this. Someone who can’t pay a $10,000 lump sum may be able to pay you $500 a month for 20 months.
A different way of doing this is to ask your client to pay a portion of the amount you’re owed now and then work out a schedule to get the rest of your money.
(Depending on your original agreement with the client, you may also be able to charge interest or late fees, but if this is going to make it hard for the client to pay you at all, it might be best just to charge them the original amount).
Partial payment is another option you may consider. In the example above, if you can’t afford the hit to your cash flow that an installment plan would cause, you could offer to accept $7,000 as full payment for the $10,000 owed. This way, you get some money faster at the cost of a long-term loss.
Bringing in outside help
If repeated attempts to contact the customer and collect your payment have failed, it's time to call in backup, and seeking outside help to recoup your losses.
Outsourcing to a third party collection agency like Fair capital, who is known to be professional and ethical, will take the task of following up with your clients off of your hands by using tried-and-true tactics to get the individual to pay.
A debt collection agency is effective in recovering debts because they understand which strategies deliver results.
The Andy Clarke’s method of collecting. (Email script)
A quick note to say that I am really disappointed that you have still not paid me the [..] that I'm owed for the work I did for you. In the grand scheme of things, it's not a lot of money, but actually I think that this is more a matter of respect.
I have always been there at the drop of a hat to sort out any problems you might have. I love working with you and have always taken our relationship as more than just client/supplier. But if I can't rely on you paying promptly or it takes several attempts and reminders to get my money, that's not good business.
I'm not saying that I don't want to work with you, I do. But if I don't receive what I am owed within the next couple of days, I will have to think twice about helping you in the future.
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