When customers don’t pay their bills, it can be a frustrating and stressful situation for businesses. There are a few different strategies that can be employed to try to collect payment from delinquent customers.
One option is to send friendly reminders to customers, reminding them of their outstanding balance and the due date for payment. This can be done via email, mail, or phone. Another option is to offer a payment plan, which can help customers who are experiencing financial difficulties to pay off their debt over time.
Another option is to hire a collection agency, which can be effective in collecting payment from delinquent customers. Collection agencies have specialised training and experience in dealing with delinquent accounts, and can often be more successful in collecting payment than businesses can on their own.
However, it’s important to be aware that collection agencies often charge a fee for their services, and that businesses may need to pay this fee even if the agency is unable to collect payment from the customer. Additionally, it’s also important to be aware of all the laws and regulations related to collection agencies, as there are legal limits on how and when they can contact delinquent customers, and any violations could result in penalties
How to get customers to pay overdue bills
When you’re dealing with a client that won’t pay an invoice or bill, you can do the following:
1. Send out a reminder
Sending out a friendly reminder of a past due bill is an important step in collecting payment. When customers don’t receive such a reminder, they may not remember when to pay – usually due to an honest mistake or oversight.
The reminder itself often serves as enough motivation for them to make the payment quickly and keep their accounts in good standing. As such, sending reminding customers of unpaid bills should become routine protocol – not only ensuring they catch up on overdue payments but also helping build partnerships based on trust and respect.
2. Send an updated invoice
When clients try to delay making payments, it is important to be professional and assertive. Send an updated invoice that clearly states the payment amount, as well as any late fees that may have been accrued due to the delay.
It may be helpful to include a statement reminding clients that payment is due by a certain date and provide instructions for making the payment electronically or via postal mail. Doing so helps promote good business practices and keeps track of invoices that have been sent while also allowing one to apply pressure on the client if necessary.
3. Ask why the client isn’t paying
Although it may be frustrating to wait for payments from clients, it is important to remain composed and exercise patience. Ask the client why they are not paying and try to understand their perspective. Doing so may help you find other methods of receiving payment or come to a solution that works for both sides.
In any case, it is always best practice to remain professional and friendly while being open to hearing the client’s reasons. Taking the time to understand their point of view can go a long way in resolving the issue between both parties.
4. Demand payment more firmly
Demand payment more firmly when a nonpaying client ignores your emails and calls. This is especially true for service businesses working on an ongoing basis with the client as they are in the best position to give an ultimatum. It is important to be firm but also to remain professional.
Give them specific deadlines when payment should occur, and do not accept excuses unless there is a very valid reason for it. Respect their decisions, yet take necessary steps to protect your business and insist that payments be made in full to avoid financial difficulties going forward.
5. Escalate the situation
As a professional company, we have timelines in place for our customers to adhere to when making payments on invoices. If their payment has not been received, it would be greatly appreciated if you could reach out again and kindly remind them of the agreed upon payment timeline.
If necessary, we can also provide them with a copy of the original contract and let them know that we are prepared to escalate the situation if invoices continue to remain past due. Thank you for helping to rectify this situation so that we may continue our good business relationship.
6. Sign up to a factoring service
Business owners of all sizes all over the world are subject to cash flow problems due to unpaid customer invoices. In these cases, it is incredibly helpful for those who find themselves strapped for cash and uncertain about when a customer invoice may be paid to turn to an invoice factoring service.
Signing up to such a service can provide a business with much-needed financial security in such times. This works by enabling businesses to sell their accounts receivable at a discounted rate – usually between 70% and 90% – to the chosen factoring service. This way, they receive immediate working capital while still collecting some money from their customer’s invoice once it is paid. Invoice factoring services can therefore be seen as reliable solutions which can help businesses during times of financial difficulty
7. Hire a debt collection service
Hiring a debt collection agency is always the final option after all else has failed. A debt collection agency specializes in recovering payments past due of over 90 days, so if you’re faced with an impasse then such specialists may be the only way for you to get your money back.
These services are offered with professional expertise and have specific methods of repairs & recovery tailored to each debtor’s portfolio rather than a “one size fits all” approach. Hiring a debt collection service can help you reclaim your unpaid funds while simultaneously lightening the burdensome recovery tasks that come with chasing down late payments.
8. Instruct a solicitor
When customers fail to pay their bills, it can be a worrisome issue for any business. To ensure that you have the necessary protections when such scenarios arise, it is often prudent to seek the assistance of a solicitor. Solicitor services can help when circumstances require debt collecting actions such as taking legal action or when responding to claims from non-compliant customers.
As part of their role, solicitors are well versed in providing advice regarding procedures and regulations surrounding debt collection. With their knowledge and expertise, it goes without saying that enlisting a solicitor when attempting to recover unpaid debts is highly recommended.
9. Go legal
Going down the legal route to collect an unpaid invoice is a time-consuming process, but one that may be necessary in order to reclaim any money owed to you. The County Court Judgment (CCJ) process can help you to legally and efficiently claim the financial compensation you are due.
It ensures that all parties involved are held accountable and can even act as a deterrent for future occurrences of non-payment. Although the County Court Judgment is often seen as a last resort solution, it can provide relief in cases of much-needed debt recovery.
10. Winding up petition
If you have a debt that remains unpaid, issuing a seven day letter can be an effective way to pursue payment. This will give the debtor a written notice of your demand for payment and allow them a short period of time to settle their debt. If the debt is still not resolved after seven days, then you may need to consider taking further action and filing a winding up petition.
A winding up petition is a formal request from creditors to the court requiring that the company behind the debt winds up its operations so that assets can be sold off to pay creditors. It is important, however, that all legal steps are taken with caution so that winding up petitions are issued as a last resort following careful consideration from legal advisors.
Frequently asked questions
If a customer is not paying your invoice, it is important to first reach out to them to discuss the issue. Politely remind them of the payment terms and ask if there are any issues that may be causing the delay. If this does not resolve the issue, you can send a formal demand letter requesting payment and outlining the consequences of non-payment. If the customer still does not pay, you may need to consider legal action.
To prevent customers from not paying your invoices, it is important to have clear payment terms and a process for following up on overdue payments. Make sure that customers are aware of the payment terms before they agree to the services or products you are providing. Send invoices promptly and follow up with reminders if payment is not received on time. Consider offering incentives for early payment or penalties for late payment.
If you have tried to collect an unpaid invoice and have not been successful, you may want to consider hiring a collections agency. Typically, this is a good option if the invoice is more than 90 days past due and the amount owed is significant. Collections agencies specialize in collecting debts and have experience with difficult cases. However, it is important to carefully vet any collections agency before hiring them and to make sure that they are following all applicable laws and regulations. What should I do if a customer refuses to pay my invoice?
How can I prevent customers from not paying my invoices?
When should I hire a collections agency to help me collect unpaid invoices?
Conclusion
In conclusion, dealing with customers who refuse to pay invoices can be a frustrating and time-consuming process. However, it is important to handle the situation professionally and follow a structured process. This involves first communicating with the customer to try and understand any issues that may be causing the delay. If this does not work, sending formal demand letters and considering legal action may be necessary.
To avoid such situations, businesses can take proactive measures such as clearly outlining payment terms, promptly sending invoices, and following up on overdue payments. In cases where the invoice remains unpaid, hiring a collections agency may be an option.
Overall, by having a structured approach and taking the necessary steps, businesses can mitigate the impact of unpaid invoices and ensure that they are paid for their products or services.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.