08 Sep The Best Way to Collect from Late-Paying Clients
A common situation just about every service-industry entrepreneur faces is what to do when a client misses a payment. This forces the business owner to find a way to collect what they are rightfully due while potentially holding on to the relationship. Whether the delay in payment is intentional or not, there are several steps to take before pursuing legal routes.
Step 1: Locate the Error
If several clients or customers miss payments, the first step would be to double check internal systems and procedures to ensure they are being invoiced properly. Should the problem lie on the customer’s behalf, do not let their behavior grow into a barrage of reasons why their payment was missed or late. Follow up on invoices within a week and then every 15 days after date of service(s). When following up with a late-paying client, remain polite so as to avoid eroding relationships. Customers who are happy with their experience are more likely to become repeat clients.
Step 2: Personal Outreach
After 30 days of late payment, efforts to collect should be increased via personal touch points. Emails are no longer going to be effective, so the business seeking payment should reach out through a phone call as these are more difficult to avoid. This also has the added benefit of opening up a dialogue that can lead to payment or at least discovery of the reason for the client’s inability to pay.
Step 3: Legal Action
When escalating your efforts to collect into legal action, begin by having an attorney send a letter of notice on their law firm’s stationery requesting payment. While it is not guaranteed to work, an official letter from a lawyer is sometimes enough pressure. Depending on the amount owed and the stubbornness of the customer, pursuing a lawsuit might be necessary. Carefully consider whether or not taking the situation to court is worth it, as the costs of the process and time invested might outweigh what is owed. If this is the route that will best fit the needs of the business, then consult with a licensed attorney to determine the strongest course of action.
Ensure the collection process goes smoothly from the beginning by creating a plan on how to handle missed or late payments. This preplanned strategy will help phone calls, meetings and email communications be much more productive and structured. Always remember that patience, level-headedness and a logical demeanor can defuse many situations and lead to quick resolutions.