Wandering how to handle clients not paying invoices? You are not alone. In the business environment, dealing with clients who do not pay raised invoices despite consuming a certain time is not easy. This can be annoying for businesses as it leads to cash flow problems, reduced profitability, and strained relationships with the client.
At The Credit App, we do acknowledge the issue of maintaining cash flow for sustaining business and for the recovery of outstanding accounts.
This blog will offer you ways of convincing a non-paying customer to pay your invoice, measures in reporting non-payment to the bureau, and legal action to take against a nonpaying customer.
Realizing the Impact of Non-Payment
Lack of prompt payment leads to customers’ invoices failure and this interrupts the normal functioning of your business. This can lead to several issues, including:
Cash flow problems
Increased administrative costs
Strained client relationships
Reduced profitability
Strategies to Encourage Payment
Clear Communication: Having clear communication encourages payment. The invoices should be explicit. The invoices should bear the following information -
Payment Terms
Payment Due Dates
Modes of Payment
Early Payment Incentives: On-time payments should be rewarded with discounts. Late payment attracts payment of extra charges.
Flexible Payment Plans: Payment plans should be offered to clients with financial crises. It makes it convenient for them to their outstanding dues on the raised invoice
Consistent Follow-Ups: Regular follow-ups through email or phone calls with the client, reminding them of their outstanding balances. This strategy yields positive outcomes and encourages payments.
Hire a Collection Agency: If internal efforts produce no results, hire a professional collection agency to recover unpaid debts and encourage timely payments.
Reporting Nonpayment to Credit Bureaus
In cases where a client continuously pays an invoice late, it is prudent to report them to the credit-reporting bureaus. This step can work on the non-paying customer to clear debt to avoid bad credit scores.
Here’s how to do it:
Document the Debt: Maintain up-to-date records concerning the amount of money you are yet to be paid by the client. This involves the preliminary agreement, dialogue record, and any other details of payments.
Credit Reporting Services: Check out with TheCreditApp, a credit reporting service provider in the United States to report the defaulter account. Implementing credit reporting services results in poor credit ratings for the client.
Notify the Client: Notify the client about your decision to report nonpayment to credit bureaus. This step is enough to demand payment since clients prefer not to have any effect on their credit score.
Taking Legal Action Against a Non-Paying Customer (Should be last Option)
Legal action against a non-paying customer should be the last option for recovering your money. This is a more severe action, so consider it carefully.
Consult with an Attorney: Always consult an attorney for advice before seeking a legal remedy. The attorney will guide you with the most suitable action depending on various circumstances. They will apprise you of your legal rights.
Send a Demand Letter: Ask your attorney to prepare a demand letter serving as a final warning before the onset of legal proceedings. Upon your approval, the attorney will send it to the client. The demand letter will contain information about the amount due and the legal consequences in case of non-payment.
File a Small Claims Lawsuit: File small amounts in small claims court. This process is faster and costs less compared to the other legal procedures.
Pursue Civil Litigation: It is crucial to pursue civil lawsuits for larger amounts. Though it is lengthy and expensive, but possibly the best approach to recover large amounts of money.
Conclusion
Most businesses experience exploitation of services through non-paying clients. To control such problems, you should practice reflective communication with your customers. Begin with offering payment incentives, report to credit bureaus in case of non-payment, and seek legal action to handle defaulters.
The Credit App offers an easy and convenient way to report non-payment from customers or defaults directly to the credit bureaus. This service is ideal for local business people such as sole proprietors, small business owners, local contractors, and real estate in the United States.
Why Choose The Credit App?
At TheCreditApp, you get access to a user-friendly dashboard through which you securely report your non-paying customers and track the status of their payments.