Some businesses collect their revenue at the point of purchase. However, others rely on payments from their clients either during or after the completion of their services. Occasionally, late payments are going to be a factor, and they may not be too much of a hassle initially. However, when a client owes you money and seemingly will not pay no matter how much time they’re given, it can become a significant drain on your finances.

Here, we’re going to look at how you can deal with clients who aren’t paying. From how you can prepare ahead of time to minimize the chances of lost payments to how you can get the money that you’re owed, read on to make sure your business isn’t too impacted by this issue.

Include Late Fees And Penalties In Your Contracts

One of the best ways to prevent payment delays is to establish clear expectations from the beginning. Including late fees and penalties in your contracts serves as a deterrent for late payments and ensures that clients take their obligations seriously. Clearly state in your agreements how much the penalty will be and when it will be applied. For example, a contract could specify that a 5% fee is added for invoices more than 30 days overdue. When clients are aware of the financial consequences of non-payment, they are more likely to settle their dues on time.

Track Your Invoices And Send Reminders

One of the best ways to improve the finances of your business is to be fully aware of what you are owed and when. If your business relies on invoices to manage payment obligations, then using invoice tracking software that informs you of upcoming payments and automatically sends reminder emails to clients can help you keep track of things. Reinforcing the importance of timely payments is likely to make it clearer to clients that you are not the type of business to let missing payments go.

Send A Formal Letter

If the generic reminders aren’t doing the trick and you’re still waiting for late payments, then you should send a formal letter demanding what you are owed. A letter that is professional and polite yet firm, while also being personally addressed to the client, can make it clear how seriously you take the situation. Ensure that the letter includes the amount owed, the original invoice number, the due date, and any late fees incurred. You want to put together a paper trail record that you took every measure to keep your clients informed of their obligations should things require legal action down the line.

Use Debt Collection Tools

If you’re getting results from reminding your clients, then you might need to start the debt collection process. You may be able to start this internally with services like TLO skip tracing that can help you locate customers who may have changed addresses or become more troublesome to contact. Ensuring that you have up-to-date contact information and a clear idea of your debtor’s financial situation can help you decide what steps you want to take next, whether it’s direct contact or relying on professionals to handle the case for you.

Work With A Collection Agency

If all previous efforts fail, hiring a collection agency may be the best solution. These agencies specialize in recovering outstanding debts and have experience dealing with difficult clients. They use a variety of techniques to encourage payment, including persistent follow-ups and legal notices. While collection agencies charge a percentage of the recovered amount, they can be a worthwhile investment when large sums of money are at stake. Additionally, their involvement can save businesses time and effort, allowing them to focus on core operations rather than chasing down unpaid invoices.

Take It To The Courts

If you have exhausted all of your other options, then taking legal might be the only course that’s left to you. Filing a lawsuit against a nonpaying client is a major step, and you might not want to do it where the stakes are lower, but where large amounts of money are owed, it can be vital to set an example that you will come for what is rightfully yours. Make sure that you consult with a lawyer before sending any legal threats to make sure that you know what the likely potential outcomes are.

If your business is owed money, then it’s your prerogative to do what you can to ensure that you’re made whole. Sometimes, this can mean making a compromise with customers and clients, but your financial health may depend on you taking action to get what’s yours.