What to Do When a Client Won’t Pay [Infographic]

James Brockband https://clarendonlondon.com 6m 1,508

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Client Not Paying? Here’s What You Can Do!

Past Due Invoice

When you run your own business, it can sometimes feel like you’re more of a debt collector than an entrepreneur at times!

It’s frustrating when a client won’t pay up on their invoices and things can very quickly get messy if you don’t find a resolution.

It should be a simple, straightforward process, but no matter what kind of process is in place, the responsibility falls on the client to pay up on time and for whatever circumstances, this sometimes doesn’t happen.

Having put so much hard work in for a client, it can be a really frustrating position to be in, but it’s important not to lose your cool and risk losing the business of the client.

So, what can you do? Well, this infographic from Clarendon serviced apartments includes a simple and effective step by step guide to help you get you your money while avoiding any falling outs.

Starting out with some friendly reminders, before moving on to making things easier for the client and ultimately taking action if they still won’t pay, it makes for a good read for any small business owners, whether you’re in a situation like this at the moment, or just want to be prepared when it does happen!

What to Do When a Client Won’t Pay [Infographic]

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What to do when a client won’t pay

Step-by-step guide

Collecting invoice payments from clients should be simple, routine process, with all settling up within a 30 day (or otherwise agreed) period.

Unfortunately, however, everyone in business is, at some stage, met with a client who won’t, or can’t, pay their bills.

From honest cash flow issues through too obvious excuses and simply those who have overlooked payment due to being busy with the day-to-day running of their business, there’s a multitude of reasons why invoices go on paid in these, especially when for significant sums of money, can have serious consequences.

It’s important to know your options for getting overdue invoices settled and Below you’ll find a simple, but effective, step-by-step guide.

Keep on top of bookkeeping

By keeping on top of bookkeeping, you’ll know as soon as an invoice becomes over and be in a position to deal with it in a timely fashion. There is nothing worse than chasing an invoice for the first time 3 months after it’s due date.

When a payment becomes overdue

Drop your client a friendly reminder

Many overdue invoices, especially when dealing with SMEs, are late simply because it slipped through the net somehow. This is nothing malicious and a simple phone call or email to remind that the balance is due will be enough to see payment come in.

Send a full statement of account by post

If you drop a friendly reminder and don’t see payment come in within a few days, send a full statement of account by post, marked ‘FAO Accounts’. Be sure to send it recorded delivery so you can prove that it was received.

Go straight to the top of the business (if applicable)

Unless you’re dealing with the micro business, and which case you’re likely already dealing with the directors, tried putting in a call or email to a director. In many cases, will have no idea that the invoices outstanding. You’ll find director details available at companies house (htps://beta.Companieshouse.Gov.Uk/).

Their email address will typically be in the same format as you have for your usual contact at the company and if you can’t find a direct number, some on the main line and ask to be transferred.

Issue a letter before action

If you’re still facing an unpaid invoice after the above, issue a letter before action, sent in writing through the post. Again, be sure to send recorded delivery.

Sending this will get you paid almost 90% of the time.

Such a letter, which is an official and formally legal notification of an impending lawsuit, is a way of saying this is your last chance.

Include in the letter all the essential information: what the job was, invoice reference and date, how much is owed, for how long, and your payment information.

Offer your client payment options

Offer to accept payment and installments

Many businesses experience cash flow issues from time to time and honesty is generally the best policy here.

If your client sites cash flow issues; consider offering to accept payment and weekly or monthly installments, ideally on a direct debit.

You can quickly and simply collect direct debit payments through system such as gocardless.Com

Offer to settle for a lower sum (in some cases)

Using a debt collection agency or solicitor can become costly and their fees will typically be deducted from any outstanding balance is collected.

Before pursuing these Avenues, do a quick calculation to see how much you actually receive once he sees or taken off. Consider offering to settle at the some you receive anyway if you were to pursue a legal route on lower-value debts.

When the client still doesn’t settle the debt

Add interest and debt recovery cost to the outstanding balance

When an invoice becomes overdue, you’re legally entitled to have both interest and debt recovery cost to the value of the invoice.

Unless there’s a different rate of interest in a contract, you can add 8% plus the bank of England base rate for business-to-business transactions.

Additionally, you can charge a fixed some for recovering the debt, based upon the value of the invoice, as follows:

Amount of debt

Up to £999.99

£1000 to 9999.99

£10,000 or more

What you can charge




You have a number of options for collecting debts…

Make a claim yourself through Money Claim Online (MCOL)

Perhaps the easiest route to go down for collecting debts is to submit a claim through money claim online (mcol) at https://www.Moneyclaim.Gov.Uk so long as it’s for a fixed amount of money less than £100,000 and that the defendant is based at an address in England or Wales.

You will be initially required to pay a small fee to initiate the claim and will need to calculate the interest to be added.

This process can typically take at least a couple of months for decision to be reached.

Unfortunately, taking a business to small claims court through MCOL is likely to bring an end to any business relationship you have, especially if a CCJ has served.

Engage a debt collection agency

Engage in a debt collection agency is another option when attempting to recover business debts. Perhaps surprisingly for some, debt collection agencies don’t have any special powers and reputable firms intimidate debtors, they’re simply doing the legwork for you.

Reputable agencies that handle the issue in a way so as to ensure you don’t damage relationships.

Most agencies typically charge between 5% and 15% of the amount collected.

Pass to your solicitor

passing the unpaid invoice to a solicitor to handle is certainly a valid option, however it is recommended that you approach one who specializes in debt collection as these will typically charge a percentage of the value.

In many cases, however, a letter from a solicitor the involvement of a legal team.

Depending on your clients response, you may be able to begin insolvency proceedings and the threat of this alone is often enough to prompt a payment.

It’s always better to minimize the risk of unpaid invoices in the first place and here’s for top tips for doing so:

Carry out due diligence before taking on a new client

Always take the time to carry out due diligence before taking on any new clients, at the very least conducting a credit check on the business. There are numerous online services which can help you do that.

Also be sure to take a look at the financial health of the business at companies house.

If you discover anything on tour word, assess your options for further investigation.

Commence every job with a contract and clear payment terms

Buy outline and clear payment terms and issuing a contract before carrying out any work, you’re selling the correct tone; one which says you value the work you do and that you appreciate prompt payment as set out from day one.

Stay on top of your invoices

Knowing when an invoice is about to become overdue can help to smooth out the process and allow you to send a friendly reminder as soon as this happens. This is typically enough to prompt the payment in most cases.

Keep in regular contact with your clients and their accounts team

Having a great relationship not only with your client but also their account steam can help you to reduce a late-payment significantly.

Always take the time to have a general chat with the account team and be sure to be known as the person who is friendly and takes the time to ask how they’re doing rather than the one who only ever chases invoices!

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