You need a constant supply of money to hit the ground running, but you may come across some clients who do not pay on time. You cannot give up on such clients. After all, you rendered your products and services to them.
If you keep giving up your share, your business will eventually collapse. Some customers are stubborn; they will anyhow find an excuse for not making a payment. Although you can take legal actions against them, you should communicate to them why they are unable to pay invoices on time. Legal action is the last resort.
Entrepreneurs often get lenient with clients as chasing them for payments may affect their relationship, but you cannot ignore the fact that you also have some liabilities. For instance, you will also have to pay off money to your creditors.
If you do not get paid on time from your clients, you will not be able to pay your creditors on time, and as a result, your business will grind to a halt.
How to convince clients to pay on time
If you have some stubborn clients who are reluctant to pay invoices on time, you should use the following tricks:
1. Talk to your client
If the payment is overdue, you should immediately send a gentle reminder to your customer. You do not need to wait for a couple of days to do so; just do it the following day. Your client may have forgotten to make the payment, or they have misplaced the invoice. Your reminder will egg them on to take immediate action.
The best strategy is to keep sending them reminders about payments a couple of days before the payment is due. This will prompt them to pay the invoice on time. If your client is not answering phone calls, send them emails. Keep sending reminders every day. However, there are some clients that will ignore your messages on purpose.
Try to figure out other ways to contact them. If your client lives nearby, you can send someone to their location to get your message to them. Though it is vital to keep sending invoices at scheduled times, you should use different communication channels.
For instance, you can send a text message, post a mail or drop an email. Your client is expected to turn to any of those methods. If you work as a contractor or freelancer, ensure you send the invoice straightaway as the job is done. Sometimes payment issues arise as you forget to send an invoice to your clients.
2. Understand the concerns
Sometimes clients do not respond to your emails and phone calls because they have some issues actually. Before you reach an immediate conclusion, you should ask them why they are unable to pay on time. Sometimes clients have reasons to avoid payments.
For instance, your client may have financial issues. If their business is having a hard time, you should try to come up with a plan that works in favour of both of you. Understand their financial problems, and then try to make a payment plan that your client agrees. For instance, you can agree to accept instalments instead of a lump sum payment.
Accepting money in instalments will at least help avoid falling into an endless circle of debt. This will not just help your client pay, but you will also be able to settle your payments. For instance, if you have taken out a £10,000 loan for bad credit with no guarantor, you may not be able to keep up with payments if invoices are completely unpaid.
Sometimes clients get disappointed with the quality of your product or service, and they decide to disclose this fact when the invoice is generated. Try to offer them a solution that lets up their disappointment. Make sure you do not shout at your clients. You should rather listen to them carefully so you can decide what you can do to make it up to them.
Note that your clients can put a negative reviews on Google and social media sites. You cannot take the risk of losing your reputation. If your team has made a fault, you should accept it and figure out what you can do.
If your client is unnecessarily taking it on, you should explain to them why the work has been done that way. If you can make minor adjustments, you can do it for them. However, it is not required if you have done your job within your scope. You do not need to offer then additional stuff if you have fulfilled their requirements.
3. Explain your payment policy
When everything is resolved, a client is obliged to clear outstanding invoices on time. If your client is still being reluctant to pay you, you can remind them about the payment policy they signed at the time of hiring you. They will likely be ready to pay you when they see the contract bearing their signature.
4. Take a legal action
Legal action is the last resort. However, this scenario is possible when you have used all other methods for getting payment from them but to no avail. You will have to inform your client that you will take legal action against them for non-payment.
You will have to hire an attorney who will send a legal notice to your client. Your attorney will also help you tell how to recover payment from your clients.
For instance, you can avail of factoring services. Hiring an attorney may cost you a fortune because of high fees, and if you have already some debts to pay off, like the same-day loans for bad credit, you will have to scrutinize your business finances.
5. Hire a debt collector
If you are not interested in taking legal action due to any reason, you can seek help from debt collection agencies. It is not factoring services where you sell your invoices. They rather do the hard work to collect the debt from your clients on your behalf.
Debt collection agencies can take at least three months to cover your debt. They will keep chasing your clients to make payments. However, if your clients have financial issues, the agency will try to negotiate with you to accept less money.
Getting some money is always more favourable than getting no money. You should be ready to accept the less payment. However, note that you will have to pay some fees to the debt collection agency that could go up to 30% of the recovered money. Consider this option only if it meets your budget.
It can be a headache to chase clients who are reluctant to pay invoices. You should try to keep sending them polite reminders. Make sure you send invoices on time. To avoid further delays, you can provide discounts.
Take the help of debt collection agencies or consider using factoring services. You can take legal action against clients who are not turning you to your messages and phone calls. It is always better to get some payment up front and check the background of the client about payments.