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When you’re a small business owner or running a business as a side hustle, every invoice paid can be essential for keeping the lights on and keeping business running as usual. If a client is late in paying you for your services or products, or seems to be refusing to pay you at all, this can be very stressful.
If finances are tight, a missed payment can be disastrous, but getting money out of a reluctant client can be very difficult. Here’s what to do when a client doesn’t pay up.
First of all, chase the payment a second time. Perhaps your client has just forgotten about the invoice, or are late running their payments this month. Send the invoice again with a polite reminder that payment is now overdue. Ask if they had any concerns or complaints about the service you provided or if they need any help with your payment system.
Remind them of any late payment policies you have in place. If they now also owe a late fee, send an updated invoice with the late payment charges added to it. Keep your emails polite, but firm, and remind them again that payment is past due.
Keeping your tone polite is important, as there are rules in most countries about fair debt collection. If you want to keep working with this client with the future, you also don’t want to burn any bridges by sending rude or angry emails.
If you get no response, get on the phone. If you speak to someone in person, it makes it a lot harder for your client to ignore the fact that they owe you money. If you can, speak to someone in Accounts who can actually make the payment.
If you’ve sent a few reminders, threatened a late fee and are still being ignored, get advice from a lawyer on best to proceed. Meet an attorney who can talk you through the best options to recover what you’re owed.
Hire a lawyer to write a demand letter. Sometimes, just a letter from a lawyer is enough to frighten a company dodging the bills pay up before you have to take things any further. Don’t send the letter yourself in case you make an illegal demand. Always use a professional.
Collection agencies will be able to go in and try and collect your debt for you if your demand letter has had no results. Make sure you hire a reputable, professional company to do this for you so you keep everything above board and legal.
A proper, licensed collection agency will have the needed training and skills to pursue debts, while still trying to salvage the business relationship with your debtor if you wish to keep working with them, or just want to leave things on an amicable note. Usually, these agencies will collect on a ‘no win, no fee’ basis, so if they’re unsuccessful, you won’t have made your financial troubles first.
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