What to do when a client doesn’t pay? Tips that always work

May 06, 2020

What to Do When a Client Doesn’t Pay

A customer won’t pay for the services or the product you provided and now you don’t know what to do – a tale as old as trade. Truth is, it can happen to anyone, regardless if you’re a novice or seasoned.

Some business owners learn how to collect money from clients who won’t pay the hard way. However, you get the privilege to learn from their mistakes and be prepared when a situation like this happens, because trust us, it will at some point. Especially in an economic crisis like this, when everyone is facing a shortage of cash.

Several entrepreneurs were willing to share their experience with clients who refuse to pay and how they deal with them. There were some radical answers involving baseball bats, so we left them out and you should too.

How to Collect Money from Clients Who Won’t Pay?

‘You catch more flies with honey than with vinegar.’

Simon Young,
Managing Director, Institution

The most important thing is not to let a customer’s debt build up too much, keep them paying regularly and put them on stop if they are outside your business terms. Nobody likes a BIG bill and if a customer hasn’t paid for 2 or 3 months, sometimes longer, the amount owing can be very unpalatable for a client to pay or just make them question your service altogether. 

Putting clients on retainers works as well for us as using direct debit, but the best way to get paid it to take the matter to the top, straight to the business owner, often business owners aren’t aware that their accounts department aren’t keeping on top of payments and once you get the MD involved things tend to get sorted out much more quickly.

Don’t take excuses
either, many accounts departments will say ‘we haven’t seen the invoice’ – it’s always a good idea prior to the end of the month to call and make sure they have the invoices in a polite conversation. I’ve always said you ‘catch more flies with honey than you do with vinegar’ and asking nicely goes a long way further than beginning with threats of a court action which always becomes protracted and ruins future business goodwill.

‘Nurture your client relationships.

Paul Gibbens
Marketing Executive at Housebuyers4u

We try to maintain our client relationships so they feel a bit more valued. This can be done by simply checking up on them every now and then, helping them with a problem they may be experiencing or even by featuring them in our content in some way.

In the past, we’ve worked with not so reputable brands so we decided to deliver the work only after we were paid which worked for us.

For those clients who are genuinely struggling, we have offered payment plans to help them pay off their debts.”

Connect and do business with Housebuyers4u on Enterprise League

‘A stitch in time saves nine.’

Chris Clay
Managing Partner at Escalate 

  1. Plan ahead

The situation is evolving rapidly so it’s important that you continue to have a good idea of where you stand amid all of the uncertainty. Keep updating your cashflow forecast as new information becomes available, and pay particularly close attention to your list of debtors.

  1. Keep in touch

Stay in contact with your debtors to find out how they’re getting on and to anticipate any potential problems. Regular communication can also help bolster your relationship with your clients, which is particularly important at a time of financial stress. Our experience suggests that the old adage of ‘a stitch in time saves nine’ is particularly relevant when it comes to debtors, as a tricky conversation early on can prevent a potential issue from snowballing into something much worse.

3. Be firm

Make sure that you’re very clear in your conversations with debtors. If you’ve delivered on your side of the contract, the default position remains that you should be paid – and paid on time. Cash is king in the current economic climate, so try to resist the temptation of writing off (or waiting for) what you’re owed. It’s also worth remembering that delays to payments by your debtors could risk a knock-on effect further along the supply chain, as you may then struggle to pay your own creditors on time.

4. Be fair

The reality is that many businesses are going to face pressures on their cashflows over the coming weeks, so consider introducing some flexibility when dealing with some of your most trusted clients. If you have a good understanding of your financial position (see point 1 above) and have spotted potential issues early (point 2), you may be able to agree an alternative repayment schedule with some of your debtors.

5. And if you’re not getting anywhere…

If you feel that you can’t come to an agreement with a debtor, it may be time for expert advice. This is exactly why we created Escalate. If you suffer a financial loss because of late or non-payment, don’t automatically assume the costs of recovery outweigh the benefits. We’re already helping SMEs to recover £100 million that would have previously been written off, with a simple sign-up process, no up-front costs and a fee-only payable if we get you your money back.

Connect and do business with Escalate on Enterprise League

‘Reward good customers, rather than punishing poor ones.’.’

Paul M. Jones,
Managing Director of PJS Credit Management 

Every client should be dealt with in a different way, depending on your relationship with them and their account history. So good Credit Control requires knowledge of these things. However, generally, below are the best ways to deal with consistent late or non-payment:

  1. Talk to your customer, and try to find a solution. Their reason for not paying needs to be understood, whether it is a dispute or they are struggling financially. You need to ascertain their reason before anything else. More often than not the answer is simple (i.e. they did not receive the invoice, or it was sent to an old address). Communication is KEY!!
  1. After communication, organisation is also very important. A good Credit Controller knows the customer’s account history. They should read old communications and emails, AND ask colleagues about them. Customer information should always be up to date. There is no excuse for it not to be. Ensuring this removes most non-payment reasons. It is amazing how easy it is to improve collection stats, purely by being pre-emptive and getting organised.
  1. If the above two points are managed and followed correctly, but the customer still refuses to pay, or continues to be late, then withhold your company’s services until payment is received. This is the fairest option but should be done under caution, and without unfairly impacting your customer’s business (to maintain the best possible working relationship with them). Always get permission by management first!
  1. Charge interest on invoices. This is legally enforceable, and you have a right to do this. It is known as ‘statutory interest’, and is calculated at 8% (after the invoice is due, accumulated daily from then on) plus the Bank of England base rate. So each year from the due date, an invoice accumulates 8% interest). Should a debt reach debt collection or Small Claims Court, always ensure this interest is properly calculated, and add it on.

(You can enter a clause in a customer’s contract, whereby they agree to pay interest should an invoice be paid late).

  1. Similarly, offer early payment discounts. Perhaps 5% if an invoice is paid within a week (rather than the agreed 30 days). This gives you immediate cash in the bank, and rewards good customers, rather than punishing poor ones.
  1. Threaten debt collection. This option is only for use with clients who you assume will no longer be a customer, as it is the harshest option and will usually spoil any remaining working relationship. Think it through thoroughly and ensure all other options have been exhausted, and that you have permission from management!

Before sending the debt to a debt collector, you will have to warn the customer with a Letter Before Action (LBA). And you will need to do your research with debt collection agencies, to find the right fit for your company. Debt collectors will only ever have a certain level of success, but you will need to go through this process before the Small Claims Court procedure, or other legal action is commenced, to prove you have done everything you can to collect the debt.

7. Consider the Government’s Money Claim Direct option. Well worth investigating if you have not heard of it. They charge, but it adds weight to your argument for collection, and shows you mean business. (Their fees are added to the debt, on top of interest)

‘Get in touch with the person in charge.’

Susan Francombe

Founder of The Business of Building

  1. Be nice. It might be tempting to scream down the phone “where’s my money?” but don’t. If they do intend to pay at some time, being polite will help speed things up. 
  2. Find the right person. Check who actually makes the decision as to when payments go through. Is it the person who issued the order, or the finance person? If you’re not sure, ask. 
  3. Help them pay you. Give them a gentle reminder, a reason to pay you. Detail what you have provided, check there are no issues with the invoice, make sure they are satisfied with what has been delivered 
  4. Check your contract. Make sure your payment terms are clear, simple and protect you. Set out exactly when you expect payment. Detail late payment fees. 
  5. What next? You can consider:


    – Calling them. Emails are easy to ignore.
    – Offer payment by installments – 50% now, 50% next month.
    – Letter before action – low cost (around £5 from solicitors or debt collection companies).
    – Statutory demand – a bankruptcy threat.
    – Money Claim Online – start litigation online (but read the guidance first).Invoice factoring – sell on the invoice to a third party.

    Connect and do business with The Business of Building on Enterprise League


It is important to remember that every situation is unique on its own and has to be carefully reviewed before any action is taken. For what it’s worth, long time, loyal clients cannot be approached the same way as one-time clients. You don’t want to break a good bond because of one late payment. Always try to work things out with a civil conversation. However, if things get out of control, remember, the law is protecting you.

More must-read stories from Enterprise League:

Related Articles