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What Can We Do If A Customer Won’t Pay?

You provide a product or service, and in exchange, your clients or customers pay you money. The whole system breaks down when you don’t get paid. Your customer may be trying to cheat you or have legitimate problems making payment. No matter the situation, you can do something about it.

Why You’re Not Getting Paid

Common reasons why a business doesn’t get paid include, according to the US Chamber of Commerce:

  • Your customer sees other bills or debts as more important, whether that’s rent, taxes, or utilities. If they don’t have a lot of cash flow, others will get paid before you do
  • If you’re lenient with customers who pay late, why not pay late? What are the consequences?
  • They’re going through a difficult financial time and can’t pay on time or maybe at all. It may be difficult or impossible to collect your payment in this situation
  • If you use paper invoices, you may want to reconsider. Electronic payments are popular and quicker to process. Paper invoices may slow down how quickly you get paid 
  • You’ve extended payment terms and provided credit to the customer, and they’re taking advantage of it 
  • They’re unhappy with you, your service, or your product. If customers don’t pay in advance, they may pay late (or not at all) if they feel (rightly or wrongly) they haven’t gotten a good value 

Finding the reason requires communication with your customer, no matter how strained the relationship may be as a breach of contract lawyer knows all too well.

What Are Our Options If We’re Not Getting Paid? 

If you’ve communicated with the client or customer and it hasn’t gotten results, there are things you can do, according to our friends at Focus Law LA:

  • Take away the excuse. If they can’t find your invoice, send another. If they’re legitimately unhappy, make changes that work for you and the customer. 
  • If they’re short on cash, ask when they’ll have enough to pay you. Tell them you need payment by that date 
  • If there’s an ongoing relationship, stop providing your products or services. You’re a business, not a charity. If your customer needs what you sell and they’re disorganized or play games with paying bills, this may force them to take action

How much is at stake? If it’s relatively small, end the relationship and move on. The additional time and effort required to collect the money may not be worth it. 

Should We Go To Court?

If the amount is too big to ignore, you should consult with your attorney to discuss possible legal action. You could also use a reputable collection agency. If they’re successful, you won’t get all you’re owed, but you’ll get something.

If that doesn’t work, in addition to failing to pay you, they may violate a sales contract you executed. Depending on the amount at issue, you may sue them in small claims court. Legal action could result in an order that they return unused products you supplied plus payment for the rest. You may be able to put a lien on their property or freeze their bank accounts.

If they’re in desperate financial shape, they may not respond to a complaint filed in court or appear for hearings. This is a sign they will soon fold, and you may be one of many creditors lining up when they declare bankruptcy.

If you have a customer that won’t pay, reach out to a lawyer near you to explore your legal options.