How to deal with non-paying clients

By Adam Blanch

What to do with non-paying clients? Well, the good news is that most clients do pay. However, there are a small percentage of people who are unscrupulous. Here are a few things you can do to prevent non-payment and deal with it when it occurs.

Due diligence

A clear system by which you take on clients can often weed out most of the risks.

  • If it's a new client, it's fairly simple to find out a few things about them. Google them, ask around your networks, and if it's a large contract then ask them for a referee. A legitimate client won’t mind, but someone who gets upset should be treated with suspicion.
  • Use contracts that state the scope of work and when payment(s) will be made. There are numerous industry templates available online to get you started.
  • If your client can't pay either a 25 per cent or 50 per cent deposit upfront then they can't afford you.
  • Write an early-payment discount into your contract, backed up by a late-payment penalty. The carrot usually works better than the stick.

Chasing the naughty monkey

Some people just don't pay. Try not to take it personally, as anger can make for bad decisions. Try the following steps instead:

  1. Talk to them in a compassionate way: Find out what's going on and ask them when they can pay. Most people have either forgotten or they are having a cash flow problem. Be firm in your expectations, but kind in your manner.

  2. Make the problem theirs, not yours, and help them solve it: Let them know you cannot afford to carry debt for long, and give them a referral to your bank manager or credit provider. Your kindness is likely to get your bill on top of the pile.

  3. Call the professionals: If they really won't pay, and it's a substantial amount, contract a credit collection company. But be careful - some companies take all the risk (and a large percentage of the money recovered), while others try to get you to foot the legal expenses.

  4. Let it go: If it's a small amount, or you're sure you're not getting your money, don't keep throwing good time at bad debt. Learn from it and let it go.

If you have success with other measures, we'd be delighted if you could share it with other business owners on this forum.

 

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