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What Do I Do When a Customer Doesn’t Pay?

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When you’re in a restaurant catching up with friends, the get-together normally starts with excitement and entertainment. However, once the bill comes around and the group fails to inform the server that you will be paying through separate bills, you somehow end up with the responsibility of paying for the entire bill to prevent any hassle. While the rest of the group promise to pay for their share of the meal, many days have passed and you still haven’t received your hard-earned money. The frustration starts to sink in and you begin to wonder: “What do I do to get my money back?”

Unfortunately, this phenomenon occurs in many shapes and forms throughout all industries. In the world of business, it is highly likely that you will come across a customer that will not pay for the services that you provided. In order to prevent this occurrence from happening to you and your business, the best course of action is to prevent non-paying customers in the first place. In this article, we will be discussing preventative measures that will ensure you receive your money.

Create a Contract

Regardless of whether the customer is one of your family members, your best friend, or someone who is highly respected in your community, it is always best to have a written contract. When creating a contract, you must get all the details in place. The contract must address important factors such as:

  • The Payment Schedule – The contract must address the payment schedule and indicate the percentage of the different payments. For example, you can indicate that there will be a 20% deposit or a 40% payment upon completion. These percentages can be changed to your liking.
  • The Terms – The contract must address the terms such as when the payment will be made, whether it is 30, 60, or 90 days after the invoice has been sent out.
  • The Payment Method – The contract must address the payment method, whether it will be through credit card, check, or even PayPal. There are other companies that also consider Venmo as a form of payment, and can be something that you can consider to be a valid mode of payment as Venmo continues to become more and more popular.
  • The Scope – The contract must address the scope of your services such as the work that the customer expects to receive.
  • The Deadline – The contract must address the payment deadline.
  • The Late Payment Policy – The contract must address the late payment policy which will indicate that the customer will be automatically charged from their main payment method if their invoice is not paid on time.

Require a Deposit

If you want to prevent non-paying customers, requiring a deposit can give you leverage over your customer as they will most likely not want to lose the money used for their deposit.

Require Upfront Payment

If you do not want to require a deposit, consider requiring an upfront payment before starting any of your services instead. While some customers may feel cautious towards upfront payments, ensure that you will follow through with your services. If you have amazing customer reviews and testimonials, provide the customer with these testimonials to ease their conscience. By requiring upfront payment, it will not only automatically prevent non-paying customers, but it will also make the payment process easier.

Offer A Discount When Payments Are Paid Early

When customers are aware that they are provided a discount for making their payments early, they will most likely always pay on time. When offering discounts, make sure that there is a minimum invoice amount as offering a discount for all payments can be a bad financial decision.

Offer Payment Installments

Unfortunately, there will be instances where a customer will have trouble paying their bills in full every month. In order to make it easier for them and to create a middle-ground for yourself and your customer, offering a payment installment can be a great option to prevent non-paying customers. For example, if a customer’s invoice costs $1000, offer 4 months of installments.

Charge A Late Fee

As mentioned earlier in this article, a late fee is another preventative measure for non-paying customers. In order to encourage timely payments, a late fee will prevent non-paying customers because they will not be willing to lose more money just for paying late. However, it is best to first send the customer a gentle reminder that their invoice is due soon, and inform them that they will be charged a late fee if they do not pay on time.

Be Persistent

In the event that you failed to mention or did not include late fees on the contract, be persistent with your customer and contact them everyday until they pay. However, this does not mean that you harass them and become aggressive, it simply means that you send your customer a gentle reminder every day or every few days through multiple phone calls or emails.

Halt The Services

While this may not be a popular solution, halt your services and do not offer anymore services for your customer until they pay off their late invoice. If you halt your services in the middle of a project, you will have some sort of leverage and will incline them to pay for their invoice.

Seek Legal Action

While we understand that seeking legal action is the worst case scenario as it is expensive and time-consuming, do not be afraid of this option. In the event that it’s been months and the customer has not budged, seek out lawyers around the area that provide affordable rates for sending letters for unpaid invoices. For a lot of customers, the thought of legal action is enough to encourage them to make a payment.

As business owners, it is your responsibility to ensure that your customers pay for the services provided. By following these preventative measures, the number of non-paying customers will stay low while ensuring that your technicians are paid for their hard work and dedication.

Posted In: Customer Service, Management, Money

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