Posted on in Sales

Anyone in business for themselves has most likely faced the dilemma of a customer who backs out of paying the bill. It results in a rollercoaster ride of emotions, from anger and disbelief to total frustration and a feeling of being powerless. If you find yourself in this predicament, consider taking the following steps.

Step One

Hopefully you’ve written a contract with the date, cost of the project, and the notation “amount due upon completion,” or at least provided an invoice for the amount with payment terms such as “net 30” or “net 60.” In either of these scenarios, if you haven’t been paid by the designated date, or if it’s one day after the net terms, it’s time for a personal phone call.

Be polite and professional, but be firm. This is your first contact and you don’t want it to go haywire from the start. When you speak with the customer, ask why the bill hasn’t been paid. They could simply have forgotten, or the situation could be more serious. It could also be that they weren’t completely satisfied with your services.

Once you know why they haven’t paid, you can take action. If they forgot, offer to stop by and pick up a check or ask if they have a credit card they can use to pay the bill. If money isn’t readily available, offer to work out a payment plan or offer an extension. If they aren’t happy with the work, find out if it’s something you can easily fix that will satisfy their concerns, or even consider offering them a discount.

Don’t be afraid to speak up. If you don’t ask for payment and suggest a couple of options, you may end up waiting longer than you’d like for the alleged “check in the mail.”

Step Two

Even if you’re the sole owner and make all the decisions, have someone else call the customer about payment. It’s a subtle move and it sends the message that you’re not working solo. It also lets them know they’ll be dealing with more than one person until the issue of payment is resolved. Be persistent if necessary, with once-a-week reminder calls that the bill is overdue, but don’t violate your state’s laws concerning harassment.

Step Three

If the phone calls don’t prompt a payment, the next step is to send an actual letter. Make this as professional as possible. If you have letterhead, use it. If you don’t, have the letter typed with the name of your company, full address, and phone number added at the top. Be sure the letter carries a complete date, as well as your name and title. Explain that you may turn their account over to a collection agency or attorney or even report them to a credit bureau.

Sign it and attach a business card. Keep a copy in your file so you have a paper trail of attempted correspondence. To ensure the envelope is delivered, invest a few dollars and have it sent either priority or registered mail. With priority mail, you can track when it’s delivered. With registered mail, the customer will need to sign for it. Either way, you want proof of delivery, should you end up in small claims court.

While emails are an optional source for contacting customers, all too often emails are lost to spam folders or deleted without being opened. There’s always the “I didn’t get an email,” excuse and there’s no way to track it other than having a copy in your sent folder, which doesn’t prove the customer received it.

Step Four

The customer is not answering or returning your calls. They’ve been sent a letter asking for payment for services rendered and you’re still waiting. The next step is to contact an attorney. While the hope is that you won’t have to go to court or sue the customer, your previous attempts are not having an effect and you need to push harder. Once you hire an attorney, he or she will take over and contact the customer. A letter from an attorney outlining the situation is often enough to prompt the customer to make contact and explain their intentions.

Step Five

If you’re in a position where the work you’re doing is part of an ongoing project, you could have an out. Assuming the customer put down a security deposit with the remainder of the balance due at a particular date, let them know you will only complete the job once they uphold their end of the contract by paying the balance.

Step Six

In lieu of an attorney, you can also turn the account over to a collection agency and let them handle the situation. Your last resort is to take the customer to small claims court. In this scenario, the customer will be served a summons to attend court on a specific date. Check with your state for the maximum amount for which you can sue.

For large projects, it’s often best to ask for a security deposit before beginning the project. You also have the option of billing in advance to ensure you have the money in hand prior to doing any work. If a customer balks at either option, it can be an indication that you’ll end up chasing them for payment somewhere down the line.