What to do when your customer refuses to pay
Why is having the right debt collection letters for your business so important? Ask any business what its biggest challenge is and, chances are, you’ll be told it’s the relentless drive to win new business. Whether its identifying new prospects or targeting existing customers, there can be no let up in the quest to get more orders on the books. Failure to build up the customer pipeline will inevitably result in a disruption to cashflow – and that can prove disastrous for any business.
But winning new custom doesn’t, in itself, guarantee business success. There’s another, more frustrating, challenge to contemplate, and one that is completely out of your control: your customers’ failure to pay.
When your best just isn’t good enough
Picture the scene: you’ve been working night and day on a critical project for a customer, putting in hours and effort well beyond the call of duty just to ensure that your customer achieves its own targets. You meet the deadline and your customer is delighted, but 30 days after issuing your invoice, you’ve still not received payment.
A quick phone call to the customer may be met with any one of the following responses: ‘we haven’t received the invoice, please can you reissue’, or ‘the computer is down’, or ‘suchabody is on holiday/off sick’, or any other manner of uncreative excuses. You may then be lucky and receive your payment but, increasingly, such excuses are just used by customers as delaying tactics. After all, holding on to your money is a cheap way for them to get what is, in effect, a loan.
And it’s not just small businesses that employ the late payment tactic: outstanding invoices from large companies are often a business’ biggest asset. So what can you do?
Establish a debt recovery procedure
Overdue bills are a time-consuming headache, expensive to collect on your own and divert your attention away from your core business. Nevertheless, it is inevitable that somewhere along the line you are going to end up chasing your invoices.
The best thing you can do is to put your own debt recovery procedure in place to give yourself every chance of getting your money back at the lowest cost to you. This process should include one or two ‘friendly’ phone calls, followed by email, letter or fax to the customer giving reminder of the outstanding payment and your payment terms. A commercial solicitor can help you set the procedure up and provide you with templates for initial reminder debt collection letters.
But if your reminders are still failing to produce a payment, then it’s time to get serious.
Enlist the help of a commercial solicitor
Okay, none of us really likes to upset customers by getting overly ‘heavy’ with them. After all, firing off a series of solicitor’s letters is hardly conducive to future business relations. But let’s face it, we’re talking about a customer who has refused to pay you what you are rightly owed and who is, therefore, potentially jeopardising the financial stability of your business. Do you really want to do more business with them?
Your focus now has to be on doing everything you can to get your money as quickly as you can. And the best way to do that is to seek the help of a commercial solicitor. Whilst you could employ the services of one of the many debt recovery companies, they tend to be more expensive and charge a percentage of the total debt recovered (usually 10 – 15%). Also, some use unnecessarily forceful and threatening tactics.
A solicitor, on the other hand, will agree a fixed fee with you up front. He or she will also have a full understanding of the legalities involved and the experience required to tailor an approach specifically to your requirements, thus increasing the chances of a quick settlement. And, of course, a solicitor can be relied upon to conduct proceedings in a professional manner at all times.
Truelegal can help you with debt collection letters and draft a Letter Before Action on your behalf, clearly setting out what is required from the customer and threatening legal action should the customer not oblige within a set time frame. For many customers, a solicitor’s headed notepaper and the merest hint that legal proceedings may be taken against them is enough to get them running for the cheque book. However, should you have a particularly reluctant customer, a solicitor is obviously best placed to take the matter further, and to court, if required.