That old expression, ‘cashflow is king’ really is true – especially for entrepreneurs and small business owners. Cashflow reportedly kills up to a quarter of small businesses, so ensuring you get paid as and when you expect is super important.
But, what do you do if a client doesn’t seem to be paying up? You’ve sent them an invoice.
Then a polite reminder.
Give it a couple of weeks and the problem escalates. You’ve got bills to pay and that client is letting you down!
Your first reaction might be to take to social media and publicly shame them. But, that’s a risky approach. Your other customers will see you taking this route and could potentially see you as a risky partner. And, if you’ve made a mistake (maybe the fine print of the contract says they do 90-day payments), it could be an embarrassing approach.
So, here’s what to do when clients don’t pay
• Get someone on the phone
If you can talk directly to a client, and preferably someone in their accounts department, you’ve got a much better chance of getting paid. Explain your situation – you’re a small business, you need the payment to stay afloat. Most reasonable people will sign the money off right away
• Hire a layer to write a letter
Lawyers can be expensive, so this is generally only a worthwhile option for bigger transactions. A solicitor’s letter will signal to your client that you’re serious
• Hire a collections agency
If the client is simply refusing to play ball, a collections agency can do the talking for you. These agencies will take anywhere between 20% and 50% of what they manage to collect. It’s better than nothing, but this should be a last resort. If your client is based in a foreign country, this is often your best option
• Take them to a small claims court
Take your client to a small claims court if they refuse to pay up. The limits change depending on which US state you live in, but these courts normally only deal in sums of less than $10,000. A small claims court judge will, if you win your case, put down a court order demanding that the client pays. Most other countries have a similar system too.
Ensuring you Get Paid
Hopefully you’ll rarely – if ever – need to us the above tactics. Getting paid up front for at least a percentage of your work, either through your website booking system or via check is often the best way of avoiding the issue of non-paying clients.
For more tips on running a small service business online, read our other blogs.