Dealing with Non-Paying Clients or Customers

Most business owners will agree that having to deal with late- or non-payment is one of the least exciting aspects of being in your own business.  Unfortunately for most of us, outstanding payments can happen at any time, with any clients – even those that used to be ideal clients at some stage.

Failure to effectively deal with non-paying clients can potentially lead to the failure of your business as a whole – SO, how can it be prevented and what is the best way to deal with non-paying clients or customers?

Unfortunately, once payments are overdue, there is no guarantee that outstanding monies will ever be paid, but here are a few tips to effectively deal with non-paying customers:

1. Take Care of the Basics. Before you start a formal business relationship, take care to get a basic service agreement (contract with terms and conditions) in place.  It does not have to be elaborate, but must be clear on who are parties to the contract, what will be delivered, by when and what the remuneration and payment terms will be. This is the first step towards good expectation- and relationship management.

2. Get Organised. Take care that all your business records and paperwork are up to date and organised. Accurate records will aid you in the invoicing process and enable you to track payments.

3. Establish a Clear Billing Process.  It is important to have a clear (preferably standardised) billing process for each and every customer, guided by their service agreement or contract.  A standard billing process makes it easier for business owners to know when to invoice, what was invoiced, when it was paid, or when it is overdue. If you are dealing with a high-volume of invoices it is definitely worth investing in an integrated invoicing-, bookkeeping- and financial reporting system.  This service can be managed in-house or outsourced to a bookkeeper or accountant.

4. Set a Routine. It is important to act as soon as an invoice is due. Month-end statements can serve as a payment reminder to overdue customers and clients, and for many this may be enough to get them to make their necessary payments.

5. Implement a Simple Follow-up System.  If payment does not arrive when it should, despite an initial statement being provided, it is necessary to start a step-by-step follow-up process. For example, this may firstly involve a polite, yet firm email reminder within one week of the statement being sent out, then a polite telephone call in the next week if the email remains unanswered and the payment is still not received. Next a professional, yet formal overdue payment letter with clear consequences may be sent if there is still no action. Decisive action should be taken before accounts age beyond 60 days.

6. Finally, involve the Professionals.  Should formal attempts by the business owner prove to be unsuccessful, the matter might be handed over a legal professional, for a final warning letter, and ultimately a formal legal collection process if required. Remember it is essential to provide copies of all formal agreements (step 1) and all subsequent customer interactions BEFORE embarking on a legal collection process.

In conclusion, it is advisable to remain professional and maintain courteous client relationships at all times. Should the client eventually pay, he deserves a polite acknowledgement of payment. Alternatively the business owner has to agree with the legal professionals if and how any of the diplomatically worded threats will be followed through.

Let me give you a challenge for YOUR business – Do you have Standard Business Terms and a Standard Billing and Collection Process?  If not, it might be the right time to get the necessary systems in place. YOU are responsible for your business success!

Article supplied by: Gina Mostert, Business Strategist, Consultant & Coach

About the Author: Gina works executives, business leaders and companies in the services sector, helping them to think, plan and lead more strategically or


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