What To Do If a Customer Doesn’t Pay You
If you grant credit to customers or take recurring credit card payments, the unexpected can happen—a customer fails to pay on time, their credit card expires, or the check bounces.
How can a business owner spend as little time as possible on these items, but get the cash collected? Here are a few ideas:
Re-examine Your Credit Policy
Is there a way you can have credit customers pay up front? Perhaps you can collect a deposit to minimize your risk. Maybe you can request final payment right before you deliver the final product or convert credit terms to layaway, like in retail.
The best way to speed up collections is to change your payment terms if possible.
If the client is late with a payment, respond quickly. Send them proactive reminders. Give them a call just before the payment is due if you have this luxury.
If the customer pays by credit card, monitor credit card expiration dates, and send reminders to customers to update their cards before they expire.
On your website, make it clear how a customer can easily update their credit card information on file. Automating this process will save you a ton of time.
Payment Failures and Disputes
It’s inevitable that you will encounter customers whose credit card payments, ACH withdrawals, and checks fail or bounce. As a business owner, you need to have solid procedures for processing these payments.
When a credit card payment fails, make sure your shopping cart, merchant account, or gateway processor notifies you of the failure. Contact the customer right away to correct the situation.
The same is true of bounced checks or failed ACH deposits. Assess any extra fees and flag the customer account if you want to place future payment or credit restrictions on the accounts.
You may also have customers report disputes to their credit card company. Respond to these transactions quickly, as there is always a tight deadline, and make sure you have all documentation needed at the time of sale if this comes up.
Develop Solid Collections Processes
If the payment is late, start your collections routine. Send out friendly reminders initially; as the payment becomes more delinquent, your communications can become more urgent.
Follow-up steps are important. Make sure your customer is receiving your notifications, and give them the benefit of the doubt before taking legal action.
Finally, if necessary, turn the payment over to a collections agency. The collections agency can then make continued attempts to collect the debt and implement penalties if the account remains unpaid.
Hopefully, you don’t frequently encounter these scenarios in your business. But if you do, being proactive is a great way to avoid them.
Make sure you have all the processes described above in place to handle collections in your business so cash continues to flow.