Your brand’s cash flow depends on many things. For one, it depends on how you buy and sell your inventories, how you reinforce credit policy, and what your trade discounts and credit terms are. Even your repayment and collection of accounts payable also matter. Failure to improve your brand’s cash flow can put your business at a financial risk. This is why it is crucial that you make the right decisions and ensure you get paid for your services on time.
Sometimes, you will come across clients who will deny making payments. The right lawyer specializing in civil litigation cases can help you with payment recovery. They can help you prepare, investigate, and execute the right plan to maximize your chances of winning the case.
Mistakes That Lead to Non-Payments
There are ways you can avoid dealing with bad clients who don’t pay. More often than not, a solid payment policy in place can help you prevent non-payments. However, making the following mistakes puts you at a higher risk of attracting bad payers.
Skipping a Written Contract
No matter what type of business you run or what offers you have, make sure you have a written contract that will address all important concerns. Write every detail that both parties need to know and agree upon. This should include the following.
- Payment terms
- Payment schedule
- Payment methods you prefer or accept
- Scope of work
- Deadline or the expected completion date
- No late payment policy
Explain to your customers all the details and ask them for their questions or concerns before letting them sign. They should understand everything written in the contract and have a copy of everything they sign. This is especially true when it comes to the late payment policy.
Omit Client Screening
Screening applicants do not only apply to people wanting to earn a position in your company. It also makes sense to research your potential clients before you do business with them. This will help you determine if there are already complaints of non-payments against your prospect.
Usually, you can run a risk assessment with simple internet research. You can also check your contacts if they already experienced working with your new prospect. Skipping this step can lead you to attract bad clients who have no intention to pay you back for your services.
Failure to Charge Deposits or Not Offering Installment Fees
One way to ensure you get paid before you render any service is by asking for a deposit. Most clients are very much willing to pay for a business’ services granted you already built a good reputation. If you have trouble with deposits, you can opt for installments instead.
Installment payment schemes serve as a middle ground between your business and your client. It allows your customers to pay recurring fees to pay for the services that otherwise require a large sum of cash. This can help you acquire the trust of newer clients while still giving your business enough peace of mind knowing they are rendering timely payments.
Chasing Customers Who Won’t Pay
There are times when it is best to let go of a client who fails to pay their dues. This applies if their invoice is not worth your time and effort. What you can do instead is to write off this client and refrain from making future transactions with them.
You need to have a policy in place to remind customers of due invoices. Don’t hesitate to do friendly follow-ups through phone calls or emails. There are times when your customers are too busy that they forgot to pay or the invoice never reached their email.
Small claims court offer a low-cost solution in getting the amount your customers owes you. There is no need to hire a lawyer, provided the unpaid debt is below the small claims maximum. Most of the time, the maximum amount one can claim in a small claims court is $10,000.
Hiring a lawyer is a good way to get legal advice and check if chasing after your on-paying client is worth it. They can write a demand letter for you. Most of the time, customers will simply pay you up to avoid getting sued.
Your last resort could be hiring a collections company. They can take care of customers who failed to pay your invoice that is way past their due date. As a general rule, you can contact your collections agency 120 days after the invoice date.
There are simple ways you can avoid working with customers who are already bad payers from the start. If you were unfortunate enough to come across a non-paying one, then you can use the strategies mentioned above to take care of them. Knowing how to avoid bad payers and how to deal with customers who refuse to pay is one way to ensure you are getting paid for your offers. Failure to do so can greatly impact your cash flow and your brand’s ability to succeed.