5 Tips on how to Handle Non-Paying Customers
- August 19, 2021
- Posted by: Funmilola Sanya
- Category: Business Finance
Every penny is important to a business owner and their business. Money paid on time and in full is what keeps the business rolling and running smoothly. Without it, business owners won’t be able to pay for supplies, rent, and other operating expenses. It is how employees are paid their salaries and business owners pay themselves too. Isn’t the goal of every business owner or entrepreneur to create value and provide solutions to customers’ problems and get paid for it? But this goal becomes unachievable when cash doesn’t come into the business which most times can be caused by a client’s delay in paying for your services, labour, or products. Sometimes the clients don’t pay at all. Sometimes they even ghost you. This sad dilemma can happen to any business owner, be it experienced or novice.
How do you handle clients who won’t pay for your services and cause a negative cash flow in your business? Call the police or pay them an unexpected visit early in the morning with a baton? Fortunately, these tips will help you handle them, and further prevent this problem, without the need for a baton.
Assess your customers/clients in advance
The best way to avoid a client who won’t pay for your work is to run a background check on them. If you’re working with them for the first time and it seems you are entering into a long-term relationship with them, do some research in advance before you assume they are credit-worthy. Check them up on google or on their social media platforms to see what people are saying about them, confirm from those who referred them to your business, or ask your business contacts if they know anything about them. If you are in a group or online community with other business owners, that would be a great platform to ask your fellow business owners if they’ve had any contact with your new clients/customers. Prevention they say is better than cure.
Offer flexible payment options
Sometimes, your payment options might be a major factor that prevents clients from paying on time. Opening up your payment plans and giving your clients easy and convenient options to pay you will save you from running after them for payments. A client who prefers to pay by an online system will have hassles paying you if you only accept cash or cheques. Most customers would prefer to make payments via the click of a link from their comfort zones – anywhere, anytime. It is an added advantage to your business as well.
Professional invoices and quotes are legally bound documents that show you provided services to the customers or that you’ve completed the project. Invoices should be issued out as soon as possible. Using automated invoice processing software such as Xero, Invoicera, Zoho Subscriptions, or Kofax will help you schedule invoices in advance and automatically send them out at a specific time and date. It also gives you the business owner the chance to focus on running your business and reduces the time you or your accountant spend working on invoices. Automated invoice processing software takes care of your invoice processing from creation to payment reconciliation.
Offer discounts for early payments
Early payment discounts can be a proactive method of minimising late payments. If your customers are aware that there is an incentive that rewards them for early payments, they will be motivated to open their wallets as soon as they receive their services/products or even pay before services are rendered. This helps to speed up your cash conversion cycle. Offering early payments discounts to your customers will increase customer loyalty and help create a steady flow of cash – which allows you to pay your bills on time.
Ask customers to pay upfront
It’s been proven that businesses that ask for a deposit before clients can enjoy their products or services have fewer unpaid invoices, fewer cancellations, and fewer disputes. For instance, a fast-food restaurant would have no dispute to settle with customers because the food is paid for before orders are processed. It holds for cinemas and supermarkets too. You can only watch a movie when you are issued a ticket that is paid for, and you only get your items after you pay the cashier. You are setting your business for success and creating healthy financial habits for it when you acquire capital upfront. Deposits establish commitment with a client and help seals a deal on a purchase or project.
Note that if you are great at what you do, customers would be willing to pay in advance without thinking twice.
Implement upfront payments in your business and see how it helps your cash flow for the better.
Don’t hesitate to follow up by sending out a friendly, yet firm email or calling them regularly to remind them that they are behind on their payments. There’s a chance that they just forgot or they lost the invoice. A polite and positive conversation would ease any tension and also maintain a healthy client relationship.
Featured image: istockphoto