It’s difficult when a customer misses a payment—especially when it’s one you have grown to trust. How can you convince them to make a payment? Start with these four steps below, and remember that nurturing the relationship with your customer is of the utmost importance. Fostering open communication with your customers can save you from hefty legal fees and court dates in the end.
1. Contact the customer
The first step is to make contact with the customer. Sometimes a phone call or resending the invoice is enough to secure payment. If this doesn’t work, explain the consequences of nonpayment for your particular business courteously—whether it’s discontinuing their service or reporting their delinquency to a credit-rating organization.
2. Call a collection agency
If you do not find success contacting the customer, you may consider calling a collection agency. This helps free up your staff’s time for other work and delegate responsibility to the agency. This may be the best solution for small payments, as you often won’t have to put up any money—the collection agency will just take a part of the recovered sum. For larger delinquent payments, filing a lawsuit may be warranted. Talk to your attorney about how to proceed in your state; you may not need representation for the proceedings, but it is a good idea to get legal advice before following a suit.
3. Pay attention to your staff
In severe nonpayment events, your cash flow may be damaged, and employee morale may be impacted—especially if you have to introduce job cuts and other cost-saving measures to remain competitive. In these cases, it benefits you to foster open and honest two-way communication between employees and management about the situation: what is being done to resolve it and how it will be avoided moving forward. Maintain trust by making sure that payroll is satisfied and that employees have clear expectations about when they will receive their checks. If you have to get a bridge loan or pursue financing to ensure these payments, do so. If your employees stop trusting you, you could end up facing even bigger issues, like non-attendance and loss of reputation.
4. Take legal action
If working with collections did not work, and unpaid invoices are still lingering, it is time to seek legal action. You have the choice between small claims court or civil court. Small claims court is less time, money, and is quick to resolve your issue within the same day. With civil court, you will need to hire a lawyer, and the case typically spans over a series of days—ultimately racking up in legal and court fees. Before deciding which venue to pursue, you should pursue legal advice.