What Should a Business Do When Customers Don’t Pay?
Do you consider yourself a good customer? Do you ever have trouble paying your bills? According Fool.com, 31% of Americans in 2016 had trouble keeping up with their basic living expenses, let alone other bills. When customers have trouble paying off their credit debt and bills, it’s not just their debt that hurts but the company as well. This article will explain how to avoid non-payments from customers, and the steps to make if customers don’t pay their bills.
1) Make Notes on Everything
One of the most important things you can do in your business is to keep track of everything. Keep updated customer contact information if you’re providing a service to them. If they’re paying for a product, make sure they know how long they have to make payments on it or get the payment on time.
2) Create Necessary Documentation
Every time you work with a customer, have them sign a contract specifying your provided service or product, and the agreed payment schedule. With the customer’s signature this solidifies proof that your customer agreed to the contract and required payments, in case they try to refuse payments in the future. If your customer is paying a bill with a credit card or via recurring payments, make sure to address non-payments as soon as a payment becomes overdue. It’s also important to make sure the employee overseeing your accounts receivable is aware of the legal rights by your location and any statutory limitations to which your company may be vulnerable. (PropertyCasualty360.com)
2) Protect Your Receivables with Insurance
Have you ever considered accounts receivable insurance (aka credit insurance)? This option provides coverage to your business when one of its customers fails to make payments on its debt. Many accounts receivable insurance policies cover defaulted payments due to economic declines, natural disasters or seasonal business cycles (Chron.com).
3) Contact the Customer about a Late Payment
Sometimes customers forget to make bills and just need a little reminder. This can include resending the invoice or contacting the customer with the information they provided when signing up for an account. It’s important to stay very courteous and to follow any communication guidelines set up by your company. If your company is providing a service that the customer is late on paying for, then you can let the customer know you will be discontinuing the service until they catch up on payments in an agreed time frame.
4) Call a Collection Agency
If contacting the customer isn’t successful, the next step is task a collection agency with collecting the payment. Handing over the small or large payment to the collection agency will free up you and your staff’s time to focus back on the business. Most collection agencies take payment out of the recovered sum, which is especially helpful with smaller debts (PropertyCasualty360.com). If the customer owes a larger amount of money, you should consider contacting your attorney about how to file a lawsuit in your state.
5) Be Honest with Your Staff
Maintain open and honest communication with your employees about situations involving customers not paying their bills, including how you’re resolving it and how to proceed moving forward (PropertyCasulaty360.com). Doing this helps build trust and improve reputation with staff members.