"How to collect money from clients who won't pay" is a question every business owner has asked themselves at least once. You've provided a service or product to a client and they have failed to pay you on time. Now what? Unfortunately, this is a situation that many businesses face. You've done your part, but now you're stuck trying to retrieve money that is rightfully yours. The good news is, there are some steps you can take to collect the money from customers owed to you, like following up with emails and ringing the billing department. If these steps don't work, you may need to seek legal assistance, and possibly file a lawsuit.
How to Collect Money from Clients Who Won't Pay
How to collect payment from customers
Businesses of all sizes, even freelancers, will deal with clients that pay late at some stage. 71 percent of freelancers encounter this at some point according to the Freelancers Union. The following steps can help you through the money collecting process when this unfortunate situation arises.
Send Polite Reminders
There are a few different methods you can use to remind a client that they still owe you money. The first is to send them an email or letter, depending on the type of relationship you have with them. You can also call them, but only do this if you have a good relationship with the client and they are likely to listen to what you have to say.
If all else fails, you could visit them directly and collect the money in person. However, this could damage your relationship with the client and may not be an option if they don't work with you directly.
How to Collect Money From a Client When You Have Their Contact Details: Pick up the Phone
The best way to get in touch with a client who owes you money is to call them. This shows that you're serious about getting the money you're owed and gives the client a chance to explain why they haven't paid yet. Keep in mind that some clients may be hesitant to answer the phone if they know that it's you calling, so leave a message if they don't pick up.
Go Directly to the Payment Source
Turning up at an office or business to collect money should be thought of as a last resort, as it will likely damage your relationship with the client. However, if the client is avoiding all other types of communication, you might have no choice.
Cut off Future Work
If you're fed up with a client who owes you money, you can always cut off future work with them. This will send a clear message that you're not going to tolerate being paid late and hopefully prompt the client to pay what they owe. However, this will likely affect your relationship with the client so be sure to think this decision through.
Hire a Collection Agency
If you've tried all of the above methods and still haven't been able to get the money from your client, you can always hire a collection agency. They will typically charge a percentage of the total amount they recover, so keep this in mind before deciding to go this route. 50% of something is better than 100% if nothing, right?
Take the Client to Small Claims Court
Another approach to collecting money from clients who won't pay is to pursue legal action against them. If the debt owed is under a certain amount (typically up to £10,000), you can take the client to small claims court. This is a relatively easy process and doesn't require a lot of legal knowledge. The downside is that you may not be able to get as much money as you would if you took the client to superior court.
Sue the Client in Superior Court
If the debt owed is over £10,000 you can take the client to superior court. This is a more complicated and expensive process than taking them to small claims court, but it could result in you getting more money.
Go to Arbitration
If you have tried unsuccessfully to collect payment from a client, your next step should be to go to arbitration. This is where an arbitrator will review your case and make a decision about the payment. The arbitrator's decision is binding, meaning that the client will have to pay what is owed according to the ruling.
There are a few things to keep in mind if you choose to go to arbitration:
- Make sure you have a valid contract that includes an arbitration clause. This will give the arbitrator the authority to rule on the case.
- Be prepared to present your case in a clear and concise manner. This means having all of your documentation in order and being able to articulate why you are entitled to the payment.
- Be prepared to compromise. While you may feel that you are owed the full amount, the arbitrator may not see it that way. If you are willing to accept a lower amount, it may help you get paid sooner.
If you have tried everything else and still haven't been able to collect payment from your client, going to arbitration may be your best option.
In Future, Charge Late Fees
You have provided excellent services, yet still, encounter irresponsible clients. To reduce instances where you have to figure out how to collect money from clients who won't pay, consider charging them late fees. This will add to the total amount they owe, but it will prompt them to pay on time in the future so that they don't have to pay more. Be sure to consult with a lawyer before implementing this policy to make sure it's legal in your state or country.
If you find yourself in the unfortunate situation of having to chase down payments from delinquent clients, don’t worry – you’re not alone. Every business at some point has to decide how to collect payment from customers, because some clients just won't pay! By employing some or all of the methods we’ve outlined above, you can greatly increase your chances of recovering what is rightfully yours. Remember, always stay polite and professional; after all, you never know when that client might come back around with new business opportunities.
Have you had success (or failure) using any of these tactics to collect on overdue payments? Clinked would love to hear your thoughts in the comments below! Never heard of Clinked? We offer client portals - click on the button below to find out more.