Work is Not Free: What to Do When Customers Ignore Your Invoices
There’s nothing worse than when one of your clients has an outstanding invoice, especially when you’re running a small business and you have to keep an eye on every penny coming in and going out. When economic cycles are taking a downturn, many clients take longer to pay. However, this is not necessarily a comfort when you are trying to keep your company afloat. One of the biggest roadblocks for most businesses is dealing with customers who don’t pay their invoices or those who are slow to pay. Here are some helpful tips for business owners who are tired of working for free.
Contact your customer:
Start with a friendly reminder that payment is past due. In many cases, the delay is caused by an honest oversight and your customer will pay as soon as possible. It’s not always easy to bring up the subject of a late payment. Once way you can ease into the subject is by asking the clients if they were satisfied with the products or services you provided before you discuss the overdue balance on their account.
Resend the invoice:
There may be instances where a client may explain the late payment due to the fact that they did not receive the bill or they have lost it. In this case send an updated invoice straight away, even if you suspect that the client has the original copy.
Give a specific deadline:
If a late-paying client has so far ignored your invoices and your calls, you are perfectly entitled to be a little more demanding in your request for payment. You are in a strong position, particularly if you have an ongoing relationship with this client. Give them a deadline and explain that if they do not pay within this period you will no longer do business with them. Most likely they will pay rather than have to take the time to find another supplier.
Hire a factoring company:
Factoring is a type of financial assistance aimed at helping improve your cash flow if your company is having difficulties with late-paying customers. Usually, the company will purchase the late client’s account receivable and gives the client access to immediate funds to make payments for their business expenses. That way you are no longer left with a cash flow shortage. You can find out more from Business Factors.
Hire a collection agency:
If your repeated attempts to contact the client have failed, it may be time to consider hiring a debt collection agency. This type of agency specializes in recovering payments which are overdue by more than 90 days. This frees up your time because you no longer have to keep trying to follow up with the client. A good collection agency has a range of tried and trusted method for getting customers to pay their bills. They even have solutions for locating people who have moved or changed their phone number.
File a lawsuit:
For many small businesses, the cost of suing a non-paying client is just not worth it. However, if the customer owes you a large amount of money, and refuses to pay you or a collection agency, that can tip the balance. If the amount is within a few thousand, you can file a suit with the small claims court. For larger amounts, you will need to file a suit with the superior court. If you do decide to take the legal route, discuss your options with an experienced attorney before filing your suit. If a non-paying client has filed bankruptcy, you will definitely need to file a lawsuit.
If you want to get paid on time, one of the main things to remember is to always get your invoices out on time. If you are slow or irregular at sending out invoices, the message you are sending to your clients is that regular payments are not important. Be prompt with your invoicing and specific about the time limit you are giving your clients to pay.
If you find you are consistently having to battle with a client to get paid for their invoices, you may have to consider dropping the client. As a professional business owner, you owe it to yourself to only work with other professionals. Walking away from a client now can save you time and money in the long run, so you can focus on your company rather than collection letters and lawsuits.
Oscar Page runs his own small business and loves to find ways to make things more efficient. He also enjoys writing about his insights and experiences on a variety of finance and business blogs.
Founder Dinis Guarda
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