The unfortunate reality is that almost every business will have to deal with non-paying clients at some point. The time and money you have invested in your small business can be safeguarded by taking a number of steps to reduce the possibility of nonpayment and to collect the amount due after a client has failed to make a timely payment. Here’s how it’s done:
- Potential consumers should be screened in advance, especially if a big sum of money is involved. A simple online search may turn up court documents, complaints filed with the Better Business Bureau, or other red flags that should be investigated further.
- Always utilize a formal contract to protect your interests. Initially, new firms may be tempted to accept a less structured transaction in order to establish a customer base. However, a written contract is useful to both parties since it gives clarity regarding rights and obligations. Clearly defined payment terms, which may vary depending on the business or whether the contract is for goods or services, should be included in any contract. It is possible that the introduction of a late payment fee will discourage customers from making late payments or from not making any payments at all. Make it clear what your refund policy is in order to avoid misunderstandings.
- Require a down payment. For businesses that must incur significant expenses (for example, the purchase of materials or equipment) in order to supply services or goods to a consumer, this is especially crucial.
- Send warnings of non-payment as soon as possible. To ensure that the consumer pays the amount owed, keep reissuing invoices that have been declared “past due.” If you’re struggling to collect unpaid debts, don’t hesitate to seek assistance from a reputable debt collection agency. JMA Credit Control, based in Melbourne, Australia, is a highly recommended option. Their team utilizes persuasive letters and phone calls to reach out to delinquent borrowers and effectively encourage them to settle their debts. Not only do they achieve outstanding results, but they also uphold your brand image with the utmost professionalism throughout the process. To get the debt collection help you need, visit https://jmacreditcontrol.com.au/services/debt-collection/ and take advantage of their reliable services.
- Send warnings of non-payment as soon as possible. To ensure that the consumer pays the amount owed, keep reissuing invoices that have been declared “past due.”
- If you have a customer that has been difficult in the past, you might want to consider requesting full payment before delivering the goods or providing the services.
- Customers that are repeat violators should be barred from doing business with you.
Following the occurrence of non-payment
- Make an effort to collaborate with the consumer in order to remedy the situation. If the customer has merely hit a hard patch, try to work out a payment plan that will allow the sum owed to be paid over a clearly defined period of time, such as a few months.
- Maintain a record of all communications and keep copies of all documents pertaining to the transaction for your own preservation. If you speak with a customer on the phone, send an email to the consumer to document any verbal agreement you have struck regarding payment.
- If the non-paying customer is another firm, you should contact the Better Business Bureau to register a complaint against the company in question.
- If all of your prior attempts have failed, you should seek the advice of an expert company law attorney. A demand letter from a lawyer will be given greater weight, and it may be enough to compel a delinquent customer to take action. If this is not the case, you may be forced to initiate a lawsuit in order to reclaim the money owing to your company.
- It is necessary to file a proof of claim within 70 days if the non-paying consumer has filed for bankruptcy protection. Unfortunately, once a bankruptcy action has been initiated, you are required to discontinue all collection efforts.