small business guide – when customers don't pay
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How to deal with one of the inevitables in a business or professionTRANSCRIPT
Small Business Guide – What to do When Customers Don’t Pay
As a small business or even a franchise or consultant, sending out an invoice to a customer after a job well done can give you a great feeling of achievement.
You’ll have a glow about you thinking about what you’ll spend the money on when the cheque comes in. Of course, that’s assuming your customer pays up on time or even, at all.
It has to be said, people mostly pay their bills on time, and there have been many pushes by government to compel larger businesses and government bodies in particular to ensure they pay within a small window.
For example, some councils have a policy of clearing all bills within a couple of weeks, and they’re usually excellent at keeping to that schedule.
However, some businesses don’t.
It’s rare, but it’s also inevitable that at some point somebody is not going to pay at some point.
In these cases you have to examine the issues around it and decide on the best course of action.
Don’t assume malice…
Although it’s easy to simply accept that all businessmen are “hard” and will try to drive the best bargain, regardless of the outfall, it’s still pretty unlikely that the person that owes you money is doing it out of malice.
It’s more likely that they forgot or have a genuine reason for not paying, so we need to address that first.
The initial steps then are to try and contact the owner of the business and ask them if they have the invoice and if it has been overlooked. Unfortunately, you’re going to have to get on the phone and most advisors would suggest you call them.
If you get the response “ooops! Sorry, we’ll sort it out” then it’s likely that they simply mislaid or never received the invoice. They may be lying, but try to assume good intentions rather than bad.
If you have a suspicion that they’re merely stalling, then you need to act fast and ask for written confirmation of the issues being raised.
You might find that they’re evasive though. They might tell you that they need to get “a second signature” or “there are issues with the product”, essentially any excuses that don’t seem to ring true need to be investigated.
If nothing is forthcoming or you can easily resolve/explain these issues as simply delaying tactics then you need to take further action.
The first step here is to see if they have financial difficulties. A company that can’t pay because of cash flow could be a problem – they may be on the slide and if that’s the case then you need to go in hard and fast.
Sometimes a company could just be having cash flow issues though. If you think it’s a temporary issue and the money will come eventually then you should consider writing ultimatum letters, often the “Seven day” letter first, followed by a “Three day” which will confirm action will be taken.
The main point here is communication. It’s tempting to go in very hard with a demand when really it can sometimes help to be supportive, so try to open up communication.
If you’re on a long list of people who are owed money and you support the company as they build up cash, then you’re likely to be paid first if they can see you are on their side.
When a company becomes a little more obstructive though and decides they’re going to ignore your calls, it’s probably then time to consider a debt collection agency.
Although it will cost you a little to start this action, it’s sometimes the only thing a stubborn business owner responds to.
