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Although everyone likes getting paid, the practice of collecting monies for unpaid services is one of the less desirable elements of running a business. Unpaid services can occur for a variety of reasons, stemming from simple disorganization to insufficient funds. Regardless of why your client has not paid for their services, you are still entitled to payment for the services you rendered. In order to get paid for past due accounts in a timely manner, there are specific things you can do to address the issue, collect the funds, and prevent this from happening in the future.
Occasionally, you may work with a client who is not timely in paying for services but still expects to continue receiving service. It is always important to maintain a positive working relationship with your clients, but it should be built on mutual respect. While you can work with long-time clients to figure out the best payment plan, do not allow your clients to take advantage of you by accepting non-payment for services. If you do, consider that you may be out even more time and money. Their bill total will be higher, and it will be likely that they still are not able to pay the original amount on top of the new service amount. Continuing services for a client that is past due is a gamble of double-or-nothing — you risk more time and money on a client that may or may not pay.
Instead, if a customer with an unpaid bill calls to request additional services, let them know that they have an unpaid balance. After notifying them of the unpaid balance, ask them if they would prefer to take care of the balance with a credit card or an eCheck. Instead of giving the client the choice of paying/not paying, encourage them to settle the balance. Often times, this will result in the client paying for service, which restores the balance in the professional relationship.
It is incredibly frustrating to render services and your client has not paid. After all, you have your own overhead and bills that need to get paid. You may be inclined to immediately call the client when you realize that they have an account that is past due. However, this aggressive approach may not be the best approach because it can escalate the situation and result in poor communication between you and your client. Furthermore, contacting the client verbally does not provide proof that you attempted to collect the debt owed to you.
To address the past due account, a best practice is a multi-step process. The first step would be to resend the bill. There is a possibility that the bill genuinely did get misplaced, lost, or was never received. If the client still does not respond, try sending a friendly note reminding the client that they have a bill. This documentation will help you should you ever have to go to court to get payment for your services. Keep in mind, the last resort would be sending a collection notice threatening to take the client to court — this should be a last-ditch effort to recover your costs associated with the service.
After you address the debt of a client, it is time to seriously begin the collections process. Collecting from past due accounts can be a tricky process if clients are unwilling or unable to pay for the services your company rendered. While you want to maintain pressure so that the customer knows that you are serious, you don’t want to be too aggressive or threatening, as that may worsen the situation. Providing options can definitely help expedite receipt of payment.
When it comes time to collect the past due balance from a customer with whom has not responded to your gentle reminders, it may be time to escalate the situation by calling the customer. Always stay calm and professional in this conversation, and let the client know the amount owed, options for how they can settle their bill, and what the next steps may be. Providing payment options may help the customer get on the path to settling their bill. As we mentioned, taking an individual to court is a worst-case scenario, but in the end, it may be your only option. However, proceed with caution and only after you have exhausted all other methods of attempting to get payment from a customer, and be sure you have documentation of those attempts.
There are a few steps that you can take to prevent having unpaid balances. The most important thing you can do is to ensure that your accounts receivable department is in order so that billing errors or past due payments are not a result of your negligence. By being proactive, you can eliminate mistakes, and more importantly, make sure bills are sent out on time. Take a close look at that department or your own practices to make sure things are running smoothly.
One of the best steps in preventing past due account balances is by collecting money up front for services, and especially for new clients. This establishes trust and creates a mutually beneficial working relationship between your company and your clients. Once you receive payment and a job is complete, you can decide whether or not that will be standard practice or only for new clients. You may also choose whether to request a small deposit for ongoing contracts.
Another thing that you can do is to make sure that your invoices have a due date. Implementing a late payment charge may also discourage customers from being tardy in payments. You may also choose to have payment increments for aging accounts that may also help to discourage late payments.
Similarly, you may want to have a collections company on retainer — and have a notice of this on your contract or invoice— so that clients know that there will be repercussions if they do not pay for services on time.
In business, the process of collecting unpaid balances is one of the more discouraging aspects of running a company. However, there are a number of options that can help you be proactive in preventing past due accounts and best practices available for receiving the funds rightfully owed to you.
What are your effective tactics to collect past dues?
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