Indepedent Business Consultant Freelance
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Handling a Customer Who Won’t Pay: 10 Strategies That Work

8th Oct 2016
Indepedent Business Consultant Freelance
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Businesses often struggle with customers who won’t pay their bills. Whether it’s a refusal to pay an outstanding balance or a claim that your service wasn’t adequate, dealing with defiant customers is never pleasant, but it’s a job that must be done. You need to be paid, and the customer needs to answer for refusing payment.

It’s tempting to immediately call a collection agency when the due date passes and a customer still hasn’t paid. However, that’s an expensive process, and it could damage your relationships with customers forever. Before resorting to drastic measures, here are 10 strategies (in no particular order) for receiving payment.

1. Offer Different Payment Options

There’s no need to be nasty with the customer at the beginning. You need to collect, and they need help paying. Try offering different payment options first. Instead of demanding everything in full, provide a payment plan asking for monthly payments. If they go for this plan and send in the first payment, it can be a show of good faith that removes the need for drastic measures.

2. Require Signed Contracts

Whenever possible, get the payment agreement in writing. “Trust is good for minor things—for anything important, always have it in writing,” says an article from Elorus, an online invoicing and billing company. “If a client tells you that "their word is their bond" and refuses to sign a contract, don't just walk away: run.”

3. Use Legal Counsel

When a customer drags their feet on the payment collection process, it’s always wise to seek legal counsel. They’ll apprise you of both your and the customer’s rights, and advise as to the best course of action.

4. Weigh the Cost and Worth

You have to know when to let things go. Sometimes the cost of collecting is simply too great to pursue. “Even if you take all the proper legal steps, you still may not be able to collect if there are no assets or the only assets are protected under the law,” says Anthony Johnson, an attorney for American Injury Attorney Group. “So, before you collect, make sure the cost is worth the cash.”

5. Reach Out with Empathy

Creating a mutual sense of empathy gives value any customer can understand. Explaining that your business needs the money, but you understand that the customer is struggling can help both parties work out a system of payment.

6. Don’t Fall for Everything

“It’s a well established market research fact that customers lie,” says an article from the Harvard Business Review. When they explain their reasoning for not making a payment, it might sound pretty good, but you shouldn’t always fall for it. Unless there’s evidence backing up their clams, it’s best not to give them complete benefit of the doubt.

7. Flip Roles

In other words, put yourself in the customer’s shoes. Consider the reasons they may be making a late payment. As you come to different conclusions, you can discover insight on the best way to collect.

8. Be Flexible

It’s tempting to stick to an unchangeable policy for collecting, but that may be setting you up for failure. In some cases, you may need to bend the rules just a little in order to accommodate the customer and receive payment. Writing allowances into your policies makes it easier to make flexible decisions.

9. Send Reminders and Warnings

Give the customer a few chances to make good on the payment. Send deadline reminders, and when it’s gone past, send a warning. Something as simple as threatening to call collection services can make a customer see the light and send a check.

10. Have Clear Policies in Place

Much of the confusion of missed payments could be resolved by simply stating clear policies in writing. If customers understand what’s expected of them, they’re more likely to deliver on time.

In most situations, your customers will make payments when they’re able. Sometimes working with them and maintaining a positive attitude is the best way to resolve any collection conflict.  

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