Someone is refusing to pay for a job, or you have been bothered by late payments? What can you do to overcome this? It is frustrating that customers go silent if you try to locate them, this may force you to take legal action.
Customers are withholding payment from tradesmen. It has been a common issue for most UK businesses. And everybody is aware of coronavirus pandemic consequences, therefore, customers should pay promptly as small businesses are required to get payment in time to survive.
What to do when a client doesn’t pay?
There are some essential tips to be followed if someone refuses to pay for the job.
If you have tried everything from mailing an invoice payment to sending a demand payment letter but the customer is not responding. This might enforce you to take serious action against the customer.
Mediation:
It is a structured interactive procedure where the parties try to resolve their differences with the help of an impartial mediator. An impartial third party is proficient to handle the matter with effective communication skills and negotiation techniques. Everybody involved in the process is encouraged to participate in the mediation. It can be a cheaper option than taking the assistance of court action.
Court action:
If the due amount is less than £100,000 and it is owed by more than two people or organizations, an online court claim can be made. You can do it in person also.
Official demand:
Utilize a statutory demand, and if your customer does not pay the due amount, you can file a legal complaint against them to declare them bankrupt. It is applicable when the amount is £5,000 or more by an individual. You can also liquidate the company if you and other creditors owe £750 or more.
Hire a debt collection agency:
You can hire a debt collection agency to recover your due money. If you have many clients who are not paying you in time or not responding at all, the professionals’ help can prevent your losses.
Primary Steps Before taking legal action: When the customer refuses to pay.
To avoid payment issues, use a clear invoicing process and communication plan. You can protect yourself with a signed contract. A signed contract is a compulsory agreement between the service provider and the recipients. It is the best professional way to demand the due money.
Client and company agreement:
The client contract consists of the delivery timings and deadlines regarding the paying money. Moreover, it can include;
- Detailed information about you and the customer.
- Deliverables that may include the mutual agreement things.
- Terms and conditions regarding the payment.
This will make sure that you will get the money after sending invoices. The contract may define the payment methods and the possible consequences if the payment is not done in time.
How to collect payment from the clients/customers?
Ensure that your invoices and cost price are set in the client contract. Be very careful and clear with your words as it will benefit you in receiving the pending payment. Still, the customers are not paying, go through the process of collecting payment, including;
- Send a reminder email for the due payment against the invoice.
- Inform accounts department to follow up with the person.
- Mail a late payment letter to the customer politely, quoted with your payment terms.
- Do a follow-up with the second late payment letter, this time make a firm reminder along with the description of possible legal charges.
- Send a final notice letter with the details of further payment failure consequences.
Make sure you send your final demand letter including a new deadline with a maximum of 14 days. Be very clear in the mail that you can take legal action if they miss the final deadline.
Can You Prevent Late payments?
Late payments cause difficulty in running your business smoothly. There might be some ways to prevent late payments, including;
Vet customers:
You can perform background research on the clients before working with them. Consider running credit checks to make sure of a track record of quick payment. Many credit reference agencies offer affordable services for small businesses.
Outline payment terms:
Make payment terms clear from the beginning. This will assist clients in knowing payment deadlines. Therefore, make sure to have payment terms clearly displayed on invoices along with details of payment methods. Also, mention payment mode with your account details.
Why won’t the customer pay for work done?
According to reliable sources, about eighty percent of medium-sized businesses suffer from late payment or non-payment from customers. Therefore, there are chances that you may also face the same problems. But there can be concrete reasons sometimes like a customer is not satisfied with your work, therefore decides to hold your payment. However, it may or may not be the right action (if this is not mentioned in the signed contract).
Moreover, maybe customers are running out of funds. In such cases, remind them frequently to pay them at prior once their funds-related issues are resolved.
Lastly, there is a type of customer who doesn’t consider any rules seriously, they just don’t pay their invoices. You can take legal action against them to recover your money.
Can I refuse to pay a tradesman? No, you can not refuse to pay them. If you are not happy with the services, raise your voice against them to achieve your goal rather than withholding the payments.
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