How to collect money from nonpaying clients
For business owners, there's a possibility that they would sell goods or offer services to clients who may not pay them. A Freelancers Union report states that 71% of freelancers encounter problems recovering late payments from their clients. Also, a new report finds that late-paying clients owe 59% of freelancers $50,000 or more.
Knowing the best methods to collect your money from clients who owe you is of great essence. There's a thin line between attempting to recover your money and annoying your clients. You are required to strike a balance between these two. This article contains tips that show you the steps to collect payments from customers who owe you.
Steps to follow to collect money from clients who won't pay
You may face yourself with the question, "how do I collect money from clients who won't pay me?" Of course, there may be no definite answer to the question above, but the steps below can immensely help.
Send a gentle reminder
As soon as the due date has gone and the client's money is still owed, your first obligation is to contact them courteously by email. Do a cordial and businesslike email. Use a template that is meant for payment reminders to write your email. Inform the customer that the payment date for his bill is due and provide them with the due date for payment. Your policy may include extra fees that come with late bills payment. Please discuss this with him and let him know which forms of payment you take. Please include a copy of the invoice in the email so it can be referred to later.
Call your client
Be as kind and friendly as you can when you talk to him. Learn why you aren't getting paid, then try to find a way out. Secure phone payment through a credit card number if it's practicable. If this isn't possible, ask your client to make a promise to pay you by a specific date.
Directly access the payment source
Calling your client may not yield positive results, i.e., payment by the predetermined deadline. Therefore, change your tactics by contacting the client's billing center directly instead of your regular point of contact for business. There may be some difficulties with your invoice hindering payment – the billing department is in a better position to tell this if that's the case. The billing division is also best positioned to provide a reasonable payment timetable and exert pressure to have it issued to you right away.
Send a final notice letter
You have tried to collect payment from your client without success. Intensify your attempts.
It's time to write to inform them that it is their final opportunity to pay the debt. They should be informed that they must either phone you to make the necessary arrangements to begin payment as soon as possible or call you to make payment as soon as possible.
Additionally, let them know that you will have to step up your collection attempts if they don't reply to the notification within two weeks.
Cut off future work
If you've given them an ultimatum without success, you have a good reason to stop giving the client any additional work until he pays the owed. Taking this step will ensure the client pays you so he can continue working on other projects and also safeguards you from more losses to a dishonest client.
Hire a debt collection agency
Another alternative is working with a collection agency to recover your money. You take the case to the next level by getting outside assistance to retrieve your money. However, collection firms frequently demand a large fee, as much as 50% of the total amount, even though they are frequently quite successful in recovering money from clients who owe. To get a part of the money is still a wise move. Go with a reputable collection firm.
Go to arbitration
A collection firm may not be able to secure your pay, or you might not be in tune with paying for their services which appear outrageous. In that case, you might have to resort to arbitration.
It is a less combative option than resorting to litigation. Arbitration allows the two parties to devise a compromise instead of allowing a judge to decide all the contending issues. The parties are more sure of achieving a successful outcome as they find common grounds acceptable to all.
Moreover, you can be forced to choose this option if your client's agreement or contract with this client contains a clause demanding arbitration as the first or only means of resolving a disagreement.
An arbitrator is a neutral third person whose job is to assist disputing parties in coming to a resolution. The arbitrator only mediates and encourages more deliberate and courteous negotiation between the main parties, making no decisions on behalf of any party. Arbitration has additional benefits over the courts regarding money recovery, such as being quicker, less expensive, and more informal.
Take the client to a small claims court
If the unpaid balance isn't too big, but you don't think you can recover it from the client, think about filing a legal case against them at the small claims court. These courts exist in almost all states to handle cases that have to do with fewer sums of money, typically up to a limit between $2,000 and $10,000, depending on the state. The cost and processing time for small claims courts are both reasonable. Assuming the client doesn't answer to the court, which happens frequently, you will win by default without the need for legal representation.
Sue the client at the superior court
You can file a lawsuit against your client in superior court if the amount you're owed surpasses the amount set for the Small Claims Courts to entertain. The Superior court typically takes longer to resolve issues than small claims suits, so you should have legal counsel.
Manage your services with Workee
While concentrating on other important activities, you require a platform to manage your operations as a freelance professional or business owner. Workee is a business management software that integrates various tools you'll need to manage your business and clients effectively.
Here's how Workee can effectively manage your services as an independent professional:
Workee offers a no-code professional website that is easy to start and navigate. It takes roughly five minutes to set up. You do not need to worry about complexity, as the platform has a simple yet beautiful interface with user experience as a priority.
It has an intelligent booking system that allows clients to book services and schedule meetings. It also has an auto-detect time zone that sets meetings based on your client's time zone.
Workee helps manage your clients. It syncs your contacts and has a filtering aspect based on different categories. You do not have to waste time searching through many contact information.
Workee helps you manage your finances, such as tax, invoice, and accounting. It comes with customized invoice templates for your services and appointments. You can also issue automated invoices and track your payments.
When a client can't pay for services rendered or goods delivered to him, several alternatives are available to explore to recover your pay from collection firms, arbitration, filing lawsuits, etc.
However, sometimes it's simple to recover your money from clients, as only a phone call will guarantee that. Therefore, ensure you exhaust the simple alternatives of reaching out through phone calls and suggesting a payment plan before resorting to Collection agencies, arbitration, and lawsuits.
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