What To Do If a Customer Won’t Pay

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If you’re a business owner, at some point you will have to deal with a client refusing to pay for services rendered. It’s demoralising, frustrating and can leave you feeling helpless.

In order to prevent outstanding debt, it’s vital to have secure business practices in place that encourage the prompt payment of all invoices. Before committing to work with a new client, seek out information about their credit worthiness and their ability to pay vendors.

For every new customer, you should have a legally binding contract that stipulates your payment terms and what happens if your customer does not comply.

Unfortunately, as a business owner, you will likely deal with difficult customers at one point or another, so you should be aware of your options when it comes to collecting overdue payments.

If you’ve already made countless phone calls and sent numerous emails, only to receive no response, then it’s time to take serious action. Here are three steps you can take if a customer refuses to pay.

what to do if a customer won't pay

1. Put a Hold on All Work That’s Still in Progress

If you use an invoice system to bill customers for work that you have already completed, there is often a gap in between when the work is actually finished and when your client pays. If you have an ongoing engagement, you’ll likely still be doing work for them while you await payment.

While a small gap between work completion and payment is to be expected in these cases, it’s not acceptable for customers to rack up past-due payments over the course of several months (or more).

If you haven’t already, stop doing any work for the client until they’ve settled their bill. You can send them a polite notice informing them that all work will be put on hold until they have reconciled their account.

Sometimes, there is a disconnect between your client and their internal finance department, so the delayed payment could be caused by a simple miscommunication on their end. This is why it is important first to take small steps to get your customer to pay, rather than threatening legal action early on. If they’ve made an honest mistake, there’s no need to burn bridges and potentially end your working relationship by getting the law involved.

2. Look into Alternative Debt Resolution (ADR) Options

If you’ve notified your client that you will be stopping all work and you still don’t get a response, it’s time to get a third party involved. You don’t have to jump immediately into legal action; instead, try an alternative debt resolution (ADR) option first.

The term refers to the different ways that conflict can be settled (without involving the law). Two common types of ADR include:

  • Arbitration. With arbitration, you and your client would agree to submit information about the dispute to an independent expert, who is highly trained in the subject at hand. He or she would then decide as to which one of you is right.
  • Mediation. For those owners who want to keep their business relationship intact, mediation provides an impartial third party to will help you and your client create a fair deal. Your nationally accredited mediator will listen to each side of the story and assist with negotiating an amicable resolution.

If possible, it’s best to try out some form of ADR before taking your customer to court. First, mediation or arbitration is far less expensive and time-consuming than a court case. Second, if you’re able to come to a resolution through ADR, it will likely come about much quicker than it would in court. Last, ADR is confidential, so your company’s name won’t be associated with a messy court case.

3. Hire a Debt Collection Agency

Unfortunately, the longer that a debt is unpaid, the harder it is to collect. If you feel like you’ve tried everything within your power, it’s best to hand over your situation to the experts at a debt collection agency. These agencies are made up of highly trained individuals who specialise in retrieving outstanding debts.

Debt collection agencies work with companies of any sizes and create tailored plans to pursue your debts, based on past action you’ve taken and effective debt collection techniques. They will document each step they take (including phone calls and letters) and appropriately consult with a law firm on your behalf if matters escalate.

Importantly, agencies also operate with the utmost discretion when collecting your debts from customers in order to maintain your company’s strong reputation.

If your customers’ outstanding debt is taking its toll on you financially or emotionally, it’s recommended to hire the services of a debt collection agency. When an agency assumes responsibility for collecting the money owed, you’ll find relief knowing that your critical business matters are in the hands of seasoned professionals.



Jasper reports and writes about sports, the Internet, tech, social media, and other topics from OnlineLike.com