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Payment Requests: What to Do When a Client Doesn’t Pay Up

by Claire Parker, Staples® Contributing Writer

Let’s say 30, 60 or 90 days have gone by and your client’s payment is still a no-show. Are you stuck holding the bag? Not if you follow this advice on how to make a payment request.

Don’t Dally. Rally.

“Act early,” says Michelle Dunn, a debt collection author and columnist in Plymouth, NH. “Call big accounts or an account with large balances 10 days before the invoice is due.”

And make sure the fine print, such as your address and the due date, is clear. When the bill is late, send a past due letter. “Many people misplace things. They forget or they just need a nudge,” says lawyer Mark A. Olson of the law firm Archer Norris in Walnut Creek, CA.

Always hold on to your paperwork. “I recommend to clients that they maintain good records,” says Andrew Poulos of Poulos Accounting & Consulting outside Atlanta, GA. This comes in handy if payment requests and past due letters are ignored, debts aren’t collected and you decide to take legal action. (More on that later.)

Make It Personal

Don’t underestimate the impact of personal interaction.

“I would personally call customers and tell them, ‘We need it,’” says Curt Finch, CEO of Journyx, a time-tracking and project management software company in Austin, TX. “This personal request can be very powerful.” If the personal appeal doesn’t work the first time, keep it up for a few weeks. If that doesn’t pan out, it’s time to take a different action.

“If the client is a continuing and otherwise valuable client, tighten up the terms,” Olson says. Shift to collect-on-delivery to show you want to continue business but on different terms because of the delinquency. You also can place a hold on services or products until the outstanding debt is collected.

Get Professional Help

If things get really bad, you can take more decisive action with the help of experienced professionals. This is generally only worthwhile for big-ticket debts, because you’re going to have to pay for this assistance. You’re also going to need iron-clad records, otherwise your chances of success are lower and costs may be higher.

You have two common options:

  • Debt Collection: Collections agencies take over client contact, sending a clear signal that you mean business. In exchange, they charge you 33 percent to 50 percent of the outstanding amount. Be sure to find out if you have to pay for their services even if they don’t collect. Research firms carefully with bankers and accountants in your area, as well as the Better Business Bureau. You want to work with a collector with a proven track record.
  • Legal Action: Talk to your attorney about filing a Uniform Commercial Code lien, often handled by the Secretary of State of the state in which you operate. “If you are selling a large ticket item, file a UCC Filing against the asset and don't release it until you are paid in full,” says business consultant Jonathan B. Smith, founder of Chief Optimizer in Alexandria, VA. “I have done this in the past for sales over $50,000 on a case-by-case basis.”

Action Items: How to Ask for Payment

Whenever you have an issue with getting a response to your payment requests, remember these 5 steps to getting resolution.

1. Act early: Head off problems with swift action. Don’t hesitate to call before an invoice is due and the moment payment is late.

2. Make a personal appeal: Call, visit or email clients directly to find out why the payment is late and inquire as to when they can settle up.

3. Hold all orders: Cease production or services until the payment is received.

4. Hire professionals: Lawyers, accountants or even your local Small Business Administration office can outline the legal actions you can take to recoup your money or merchandise.

5. Cut and run: If the process drags on too long, step aside and think of the big picture. It’s better to accept the loss than to waste time and money chasing a client who won’t pay.

These steps go a long way toward helping you get the money you’re due. But in the long run, if a client isn't responsive to your payment requests or is unfazed by legal action, move on.

“Realize when a client relationship is failing and cut your losses sooner than later,” Poulos says. “If you continue doing business with the client you will lose more in the long run. It’s best to lose a little rather than lose a lot.”

 

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