One of the most difficult conversations we hear businesses struggle with (especially during times of economic stress) is dealing with clients who have not paid – or worse, who refuse to pay – their bills. What we tell them is to stay calm, stay focused, and consider the many options to collect versus using a collections agency. As a last resort, a collection agency is viable but will definitely cost the business a lot more than other, traditional payment options.
Non-payment by clients is common in both trade contractor and professional service industries; if your business is in either of these fields, you are not alone. There are others who feel your pain and may have similar experiences. The solutions outlined here often work well for any type of service-focused business, not just trades or professionals.
What’s important to consider is the true cost of an outstanding debt and the ultimate successful collection of payment.
Typically, we hear from a potential client who has been hesitant to add credit card payment processing to their business. While we understand that merchant services can be looked at as an expense, carrying unpaid invoices after work has been completed is far more costly in the long run.
Whether you are a contractor who responded quickly to customers performing work on homes during the pandemic, or you are a CPA who handled delayed tax season paperwork or even PPP loan applications and forgiveness, your dilemma is: how to collect money from clients who won’t pay?
There are payment options for trades that are literally the same payment options for professionals – and for any type of business. What’s even better, they all work.
How to Collect Money from Clients Who Won’t Pay
The first thing that we recommend is to contact the client. Start by asking them if they are aware of the balance due.
If they are not aware of the balance, then a simple follow-up with the payment can take place.
We know that this is probably not the most common issue, but sometimes it is. Consider that there has been an increase in spam filtering on e-mail. Also, there is a likelihood that there is a shortage of time on the part of your client. For people working from home and balancing virtual school, parents especially may have neglected their bills for longer than they might usually. And, if you have a commercial client, there are fewer people working in offices with a very good chance that paperwork has backed up leaving your bill unpaid.
If they are aware of the payment being due, then ask if there is an issue is with making a payment. Listen to their answer. Maybe they had concerns with the work completed but never shared that feedback. Maybe they over-committed and are short on cash at the moment. Maybe they just “haven’t gotten around to it”.
No matter what the reason is, truly try to understand what the underlying reason is – but be firm that you are expecting a payment for work completed.
Listening, establishing trust and offering options is a simple and best course of action.
Payment Options for Trades and Professionals
If your client didn’t originally want to use a credit card but still hasn’t made a payment by check, you should offer to accept a one-time payment via credit card.
While most of our clients have established a variety of digital payment options that eliminate the need to ask someone for a credit card number over the phone, we recommend offering to do this while you have them on the line.
If they are nervous to do that, digital options for making a one-time credit, debit or bank transfer (EFT) payment can easily be shared with the client via e-mail, text or a secure payment portal link. Offer to send the request for payment right then, while they are on the phone. This way, you can ensure that they are able to follow through. When you see that the payment has been completed, you can thank them for their business and reinforce how much you appreciate them as a client.
Establish A Payment Plan
If they can’t afford the payment in full, offer to establish a payment plan. Make it easy for them to pay by breaking the balance down into smaller, easily manageable bi-weekly or monthly payments.
Whether an outstanding invoice is paid by credit card or e-check, in the long run, you will be able to collect more than if you turned the balance due over to a collection agency which can assess fees from 10% to 15% at a minimum, all the way up to 50% of the collected funds. Considering that an agency will usually offer a discount to the payee, you will receive far less of what is owed than if you are able to work with the client on your own.
If you are still looking for more information on the best course of action to collect past due monies, connect with us to review your particular business needs. We advise our clients on best practices, share our expertise and help business owners evaluate the best payment options no matter where they are in the lifecycle of a business. Our goal is to help you not only save time, but to bring in more revenue into your business for long-term growth.