5 Steps To Take If Your Client Isn’t Paying You
Small business owners naturally deal with many challenges that can range from frustrating to financially devastating. Perhaps one of the most common is a client or customer who fails to pay what they owe. This is particularly challenging when a business owner works within a service industry. Contractors executing work on a home, for example, are often left with two choices when billing clients. Neither of them is ideal.
Essentially, you can either bill the client prior to the work being done, or you can send them an invoice afterward. If you bill a client prior to the work being executed, they may not agree to work with you at all due to distrust. Furthermore, if the work ends up being more intensive than you initially predicted, you may end up losing money as you billed them too little. If you bill a client after the work has been completed, they may decline to pay. When small business owners are starting out in an industry, it can be difficult to choose any option but the latter, as they’re still building their reputation. But what do you do if a client refuses to pay?
1. Be Persistent
If a client refuses to pay, whether verbally or simply through silence, you shouldn’t be shy about requesting what you’re owed. It’s very likely that the client will not work with you again anyway, and you probably won’t want to work with them in turn; so rather than handling them with kid gloves, you should be upfront about what you’re owed. While you may begin with an online invoice, follow up with emails and phone calls if the client refuses to communicate. Be polite but firm. You should be frank about the fact that you work with a debt collection law firm if you already do. This is not a threat, but simply informing your client that you are prepared to pursue legal action and that they need to take the issue seriously. For a lot of people, this will push them to pay.
2. Charge Late Fees
Think about it this way: either way, your client will need to pay eventually, even if you need to work with a collections lawyer to ensure that they pay. It’s in their best interests to pay before they starting accruing too many late fees. You should have this policy in place immediately, and make sure that your clients are aware of it so that it will keep them from avoiding payments.
3. Offer A Payment Plan
It’s understandable if you’d rather not immediately engage with a debt collection law firm and want to give clients a chance to pay. Consider offering them a payment plan, breaking up their payments into smaller installments. There’s no guarantee that this will work, but it can be an option to give them before you start pursuing more serious debt collections strategies.
4. Go To Small Claims Court
If the amount is worth going to court over, you’ll want to take the matter to small claims court. It’s an inexpensive process and usually somewhat quick in the grand scheme of things. You should consult with a debt collection law firm to see if your case is worth the legal expenses required to take it to small claims court. At the same time, it’s not your only option, and sometimes is not the most effective measure in terms of ensuring that clients pay.
5. File A Mechanic’s Lien
You may also want to consider filing a mechanic’s lien against your client’s property. This can be filed 90 days after the project has been completed, and can be a great incentive for the client to pay as it would keep them from selling their property down the road. Consider filing a lien through a debt collection law firm if small claims court is not an attractive option.
Don’t feel defeated if your client isn’t paying. Though this is a setback, it’s far from impossible for you to receive your payment. Move forward with legal action through a collections attorney if necessary and consider how best to avoid this situation in the future.