Have you been cursed with non-paying clients?
They’re out there!
And it seems that they’re waiting to prey on small business owners and entrepreneurs. Who am I talking about? Non-paying clients or customers.
Increasingly, this is one of the biggest problems I am meeting as I work with my clients to help them to turnaround their businesses. And these “customonsters” come in all shapes and sizes, forms and fashions.
The big question my clients are asking me is: What to do when the client won’t pay? What do i do about non-paying clients?
Is that your question too? If so, I'll give you some strategies you can add to those you already use and if you have some I haven't mentioned, please do share them with us.
First, let’s look at the people who won’t pay. They usually fall into three categories:
- no money at the time the payment is due
- not happy with your work
- want to spend “your money” on something else
Those with no money will eventually pay you. They are basically honest people who might have fallen on hard times so be very kind to them and work with them on a solution.
Those who’re not happy with your work spell trouble. You need to get as much information about their dissatisfaction as you can. You should accept responsibility for any problems and offer a fix because whether you agree with them or not, there is serious potential for damage to your reputation.
Those who want to spend “your money” on something else are bad news too. Sorry to have to break the news to you, but they seldom intended to pay in the first place.
Now here are some strategies you can use, especially for categories one and two.
1. Choose your customers or clients
You are never so desperate as to have to work with a client who does not meet your selection criteria (you have this don’t you?) or one that meets it and then your gut says “no!” As a result of choosing my clients for among my prospects, my problems with non-payment are almost non-existent.
2. Do your due diligence
Small business people do not usually like to say who their clients are, especially in my neck of the wood. But when you ask among your colleagues about a potential client, you just might learn why that person should remain “potential” rather than allow to become a "non-paying client."
3. Make your payment policy clear from the very beginning
...and be willing to enforce whatever you promised when the debt is not paid, unless the client is faced with unexpected disaster. Understand you are a small business and you cannot carry a large amount of debt.
4. Do not play games when it’s time to confront a client about non-payment
Chances are, you entered the contract by yourself so don’t be telling the client that “their debt has been passed to the collections department.” They will know if such a department exist and if it does, they will also know that it was set up because so many of your clients do not pay.
5. Open a “B & B” list for non-paying clients
No…that‘s not Barrow and Blades as in me and my colleague teaming up to deliver great training. It’s a Block and Ban List. You just have to accept that there are dishonest people out there and protect you and your business against them.
6. You can require 100% of your payment in advance
Honest clients won’t have a problem with this but it depends on the size of the contract. I am not about to pay anyone $100,000 in advance and neither will I expect that from anyone.
7. Some people offer a discount to encourage early payment
In some of our businesses and in some cases, we do this. However, what we do is to take the full discount off the final payment. In this way, the client gets no benefit until they have paid in full.
Wrapping it all up…
So there you have them…7 practical strategies you can apply when you have non-paying clients. I really hope this is not your problem but just in case, let me recap them for you:
- Choose your customers or clients
- Do your due diligence
- Make your payment policy very clear from the outset
- Don’t play games when it’s time to confront a client about non-payment
- Open a “Block and Ban” list for non-paying clients
- Ask for 100% of your payment in advance
- Offer a discount for early payment – only after the have paid in full
When you have a client who does not pay well, feel free to apply any of the strategies above and enjoy the success.
To your collecting success...