When Customers Don’t Pay
Few things are more frustrating to small business owners than customers that fail to pay. Unpaid invoices can affect your ability to pay your own vendors or to meet other financial obligations, such as payroll.
If possible, hire someone whose sole function is accounts payable and receivable. This will allow someone to focus on and track invoices and act quickly when a customer has not paid.
Here are some tips to help when dealing with customers who do not pay.
Be Persistent – and Consistent
Be consistent in your invoicing policy, and don’t let a lot of time lapse between notices. For example, send the invoice. If it is not paid by the due date, immediately send a second notice.
If it still not paid within 5 days, send a third notice. Then, begin placing weekly calls to the customer. It’s very important not to be rude. Remember, you may want to keep the customer but you also want them to pay what they owe.
- Using phrases such as “This is just a courtesy reminder about the invoice” will help to sort of soften the blow.
- If a customer has a history of not paying, it may be a good idea to establish a “pay-as-you-go” policy.
- Make it clear that a 10% late fee will be applied to all invoices not paid by the due date. This should be clearly stated in all contracts and on all invoices.
- If your business does not accept credit cards, consider changing that. By allowing customers to pay with a credit card, you will make it easier for them to pay their invoices on time.
It’s true that there is a fee for accepting cards, but that’s less of a cost than not being paid at all.
You know how much slack your business can afford to give to non-paying customers. It’s important to retain customers and keep them happy, but a customer that doesn’t pay is costing your business money, and that’s not the kind of customer you want.
