How to Handle a Customer Who Didn’t Pay for Your Service?

If you run a subscription business or use an invoicing system, you might be familiar with nonpayment and late payments. Customers like using services, and then refuse to pay. When payment time comes, they start giving excuses, and eventually, they don’t pay. These clients will comfortably delete your emails, ignore your calls, and spend the money they owe you on other things.

Deferred payment can crush your small business. You can employ techniques to ensure you get your money, including taking legal action or selling the invoice. Here is how you can deal with a client who does not want to pay.

1. Dunning

This is the process of recovering multiple payments or missed credit card payments from a client. The right dunning process can help you reduce the number of lost clients. Dunning is a vital business process of eliminating outstanding payments by increasing the likelihood of recovering a payment.

Most businesses consider the dunning process an unpleasant customer experience that intimidates customers, especially if it is not well done. You can send personalized emails to inform your clients when their accounts are due or behind payment. When creating a dunning email, include the necessary information to ensure the client has confidence in your business.

2. Understand Your Clients

Some managers think asking questions will chase the clients away. However, getting to know your client from the beginning will inform your decisions. Do not be afraid to ask questions, for example, the payment cycles and options they prefer. If your customers get paid in the first week of the month, you should ensure the bill is due that week.

Talking with your clients will help you identify the areas where they are not satisfied, and avoid situations where the clients are not paying because they are not satisfied. A simple customer-centered conversation will further your relationship with the clients and save you time and money.

3. Accept Several Modes of Payment

Incorporate several payment options in your business including recurring payments, online payments, and cash payments. Ensure your business accepts several credit cards. By  doing so, you help ease the troubles that may arise when it’s payment time.

4. Give Incentives

You can influence the customer behavior you want through incentives. People love discounts because they get to save money. Human behavior studies suggest that people would instead buy a highly-priced item at a discount than a full-priced item that costs much less. Therefore, consider discounting your prices and offering other incentives to encourage people to pay early. Include incentives for recurring payment plans to ensure people continue clearing their debts.

Most entrepreneurs think that giving incentives will add extra fees to the business. To ensure your business doesn’t run at a loss, you can modify the prices of your goods and services to take up incentive fees.   

5. Change Your Business Process

Based on your business and industry, chances are you are giving your clients more power that they need. Most companies operate by accepting to work for a client for a set price, do the task, and then bill the client. Here, the client has so much power because the work has already been done. The client can easily choose not to pay late or not pay at all.

To eliminate such issues, request for upfront payments before delivering your products or services. Another option is to put payment agreements and policy terms in writing. The policy should include:

  • The payment dates
  • How often payments have to be made
  • What work you will do

Your policy should consist of actions the clients can take if they are not happy with the services or products instead of opting not to pay. Finally, if the payments are consistently late, consider not extending credit to some clients. Request for credit applications or deposits before giving customers an option for paying after the service or goods have been delivered.

6. Leverage Technology

Paper invoices cost a lot of time to prepare, and they are prone to errors. It is easy for clients to lose them, and they clutter in their homes and offices. Leverage on technology by using electronic invoices and accepting cashless payments. Use online tools to send bill reminders rather than hiring someone to follow up on your clients.

Cash flow is the life of every business. Therefore, it is crucial to have a substantial debt collection system to ensure you get paid for your goods and services as soon as possible. A lack of such a system leads to a waste of time, undue stress, and additional costs.

Written by nikola

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