fbpx

What to do when a client refuses to pay or can’t pay

If you’ve got a business headache right now, there’s a pretty good chance it’s to do with clients owing you money.

It’s almost as if the economic downturn has become a prime opportunity for anyone who fancies improving their own cash flow to help themselves to better credit terms from their suppliers… but without asking permission.

That has a knock on effect right down the line. And it’s no wonder that small, cash poor companies at the bottom of the chain are the ones that suffer the most.

But on the off chance your clients aren’t as thoughtful; there are is plenty you can do about it.

You should set up a clear system for chasing clients for money within your business. Schedule polite but firm reminder letters as soon as payment is due and at regular intervals. Always give deadlines for payments.

And don’t be afraid to stop working for clients who don’t pay their bills within a reasonable time… it’s not good business to do work you are unlikely to be paid for.

Worse than slow paying clients are those who refuse to pay or can’t pay. Before you refer them to a debt collection agency, there are many things that you can about it do yourself.

Here are common client payment problems – and what to do about them:

Your client isn’t returning your calls or emails

The first rule of good debt management is to make sure people know when they owe you money. But if they don’t respond to your reminders you need to establish why.

Before you barge in with all sorts of threats, you should check they have received your communications. Check the business is still alive, and running from the place you are sending the bills to – look at their website, call their reception, check their address. Also check the email address you have been emailing. It could be something as simple as a personnel change that is preventing anyone knowing about your payment problem.

If the business is still running, send a recorded letter with your final demand and follow it up with a phone call. You need to ensure they know there is a problem before you elevate it.

If the business has moved, you should try to track them down and resend your original bill. If the business has ceased trading and it was a limited company, then you will need to contact the administrators to register as a creditor… sadly, you won’t be able to bank on seeing much cash very soon. If the debt is with a person, contact a debt collection agency who will be able to advise on your next step.

Your client’s cheques are rubber (and bounce all over the place)

The law says that when a client writes you a cheque they effectively promise that the cheque will definitely be honoured by the bank. And there is an implication that if the bank does not honour the cheque they will compensate you in full. Sadly, if you have ever had a rubber cheque, you will know there is a good chance you might not get your money.

If a client’s cheque bounces or they stop it – and you have a feeling they aren’t going to pay – you are legally entitled to pursue the client and should talk to a debt collection agency immediately.

 

SOURCE:BYTESTART

 



Leave a Reply