As a small business, is there anything worse than completing a project, only to find that your client has no intention of paying on time (if at all)?
While most clients understand the importance of paying in full and on time, this doesn’t hold true across the board. So, even if you have avoided this trouble in the past, there is a chance it could come into play in the future.
According to a report by Atradius, “1 in 3 businesses surveyed in Brazil, Canada, Mexico and the United States reported that around one-fifth of the value of their B2B receivables is more than 90 days overdue.”
That’s a big number, especially when you consider the impact that late payments can have on the overall health of a business.
This leads to a very important question: what should you do about a non-paying client?
If you find yourself dealing with a non-paying client, here are three steps you need to think about:
- Contact the client by phone. Email is okay at first, but a phone call has a way of showing that you mean business. During your conversation, discuss the terms and conditions of your contract, as well as the amount due and the number of days late. Additionally, do your best to press the client for a “drop dead” date. With an agreed upon date, you’ll know when to check back with the client should they once again neglect to pay. You’ll want to be sure to document the agreed upon action plan and send to the client, so you have a record to fall back on in case you need it.
- Hire a collection agency. It goes without saying that this is a step you never want to take. However, it may be the only thing you can do if your client is unresponsive, or if the next steps you agreed to in our previous point are never carried out. Although you have to pay the agency a portion of what’s collected, it’s better than receiving nothing at all.
- Set clear conditions for moving forward. If you decide to work with the client again in the future, you must be clear in regards to the payment terms. Furthermore, it’s a must that you have a contract in place. With this, your client is less likely to break the conditions of the agreement.
In a perfect world, you would always receive payment in full and on time. Unfortunately, the business world is anything but perfect. For this reason, you may have to take action to receive payment from a non-paying client. Of course, it would be better to avoid this entirely, which is why it’s critical to clearly document expectations and terms from the start. Click through to learn more about best practices for client relationships.
This article originally appeared on the SurePayroll blog