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Mindy Lee M. Lipsky

Certified Business Coach
Certified DISC Practitioner

 

610-705-3526

 

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What to do When a Client Doesn’t Pay

We have all been there… We are expecting payment and something “goes wrong”. Sometimes it is as simple as a digital “glitch”, but there are times when a client does not pay on time. As an entrepreneur or a small business owner, you are most likely managing your cash flow by the contracts you have or the invoices you have sent. At times, a missed or unpaid invoice can send your whole budget into a tizzy. There is a lot of emotion around money on both the business owner and the client’s part. The best thing you can do is create a plan for how you will handle this when it happens, to avoid reacting in an emotional way instead of a professional way.  Here are some tips to help you create your system for non-payment.

Be sure you have a full system!  Think your payment process through from start to finish. Be sure to let your clients know the following:

1.       Be as basic and specific as what forms a payment do you accept… Cash, Check, Credit Card, PayPal, other merchant services, etc… As well as lengths and terms for payment plans.

2.       Have a written refund policy. Have it clear, concise and in regular print (not fine print). If you have a contract or a standard invoice have it print it on that.  You can even consider having them initial that they read it.

3.       Past due/Late payment policy with set fees. This should be consistent throughout your business. Have a set late fee, with a set period that you consider a payment to be late. 3 days, 5 days, 7 days? My suggestion is no longer than 14 days.

4.       What is your returned check/payment policy and fee? Be sure you know what your bank will charge YOU. Bank fees have gotten out of hand… you want to be sure you recoup at least the bank fee along with a little extra for your administration costs to reach out to collect the debt. If you have a recurring payment option, how many payments need to fail before your recurring stops. Will your system retry the payment in a few days? Check with your merchant provider for guidelines to this.

5.       If you provide a service, make it clear that services will not continue until the client payments are up to date. You want to also be clear as to if you are willing to make up sessions or time that the client was past due.

6.       Decide the length of time you plan to attempt to collect the debt before taking legal action.

7.       All your expectations, terms and conditions should be readily available to your client… it should be written in contracts or on receipts and can be listed on your website. Always include your contact information so that if there are any questions you can be reached easily.

8.       It is a great idea to have your lawyer look over your contracts and Terms & Conditions to make sure you are compliant. You will also have someone who is familiar with your terms to contact if you need to take legal action.

 

 

 

Once you have your system I place… there may be a time you need to enforce it. Here are some tips on how to not burn bridges as you try to collect payment…

1.       Always give your client the benefit of the doubt. Reach out to them and ask if they are aware they missed the payment.  Sometimes it was a complete oversight, problem solved… sometimes they are having a financial hardship. See if there is a way you can work together to get the payment made. Be careful of breaching your own policies… if you change the terms of a contract be sure to send it to them in writing and save a copy for yourself.

2.       Be sure the client understands the policies and the contract they agreed to. Offer to answer any questions they have. Be available.

3.       Be diligent about follow up. Tell your client when the next payment is due, if another late fee will be assessed, etc.

4.       Do not be standoffish… like I said early… money is emotional. You can feel devalued, taken advantage of… even betrayed. Understand that threatening, badmouthing or the silent treatment is not going to resolve the issue. Keep open lines of communication if you can and do your due diligence for the time you set before you begin to take legal action.

5.       When it is time to take legal action, the best practice is to first send an official letter stating when you will be taking the issue to a lawyer or the courts. Be sure you have all our ducks in a row… copies of signed contracts or invoices, print outs of emails with date stamps, etc.

6.       Most of all…. STAY PROFESSIONAL. Your feelings are hurt, but if you start mudslinging or talking badly about a client… it just makes YOU look bad.

I hope you never find yourself in this situation, but if you do, having a plan in place can be a sanity saver!

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