What To Do If A Client Refuses To Pay You?
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All successful contracting businesses are bound to face difficulties at some point, one of which is client non-payment. Clients and customers may refuse to pay you for a wide variety of different reasons, from feeling unhappy with the work you completed to miscommunication throughout the process. Whatever the reason for non-payment, you want to receive that hard-earned money, calling on the need to understand the different avenues of action available to take and how to prevent payment issues going forward.
Understanding Your Options For Client Non-payment
The First Steps
The first step to payment collection is to send an invoice right after the work is completed - not only is this important to make sure you get paid for the job, but also for improving your business's cash flow. Contractor invoices usually come with a date ranging between 30-60 days for the full amount due. Once that range has passed, it will be vital that you communicate with your clients. Follow up through phone calls, emails, and text messages to understand the rationale behind the late payment. Many contractors see greater success with scheduling a face-to-face meeting with the client. This gives them the opportunity to go over any aspect of the job they aren’t happy with and reduces time spent working out payment terms.
Try to find a peaceful solution that is beneficial to both parties. Maybe this is taking off a certain percentage for customer unhappiness, finding an alternative payment method, or creating a payment plan. A peaceful approach can save both you and your customer a headache from bringing legal action.
If a peaceful solution isn’t an option when a client refuses to pay you, you may need to seek legal assistance. All contractors should have a signed agreement between both parties before any work is completed. Contractors have the ability to sue customers for non-payment. Be sure you contact a lawyer to help you through this process and weigh the cost factors of bringing a lawsuit. A small job might not be worth the time or resources to bring to court. Moreover, what happens if you don’t have a contract with customers? You can still bring a lawsuit against your client; however, there’s no guarantee that the court will side with you.
How Can You Prevent Payment Issues Going Forward?
Many small business owners learn from past mistakes, making it important to constantly review your policies surrounding client payment. First, thoroughly analyse your clients before you create a contract. If your gut is telling you there may be issues, listen to it. Furthermore, be sure you have all jobs in writing. Each client should have a contract that details the price, terms, and work to be completed. Finally, request a deposit from all clients before work is started. This ensures you are receiving a portion of the cost upfront to prevent a total loss. A lot of businesses in the construction industry request a client deposit upfront that covers the cost of any products they will need to buy for the job - at least this way, the business isn't out of pocket for any materials.
Dealing with clients that refuse to pay is a downside of running your own contracting business. Just like it’s important to consistently revisit your payment function, it’s also important to review your business insurance. Your current coverage and rates should be revisited frequently to ensure your business is properly covered, which is why we suggest using our instant quote generator, where you can get an estimate on market-leading insurance in seconds! Simply enter your occupation and expected revenue to get started. Reach out today for more information.