How to Collect When the Customer Won't Pay

Having trouble collecting from your customers? Wondering how to deal with customers who won't pay or are slow to pay? These suggestions will help you collect from past due accounts.

Chances are most of your customers pay you within a reasonable amount of time. But sooner or later you will have to deal with a customer who pays very slowly or not at all. What can you do? And just importantly, what can't you do to collect the money owed you? Here is what you need to know.

First things first

Fend off collections problems from the start by running credit checks on new clients and by discussing your prices, service fees and payment requirements with new customers before you do their work.   

If you work on a retainer basis or provide services under a contract, make it clear what services you will charge for, what deliverables the customer will get for the fee, and what work will incur additional charges. Be sure to let the customer know how often you will bill and how long they will have to pay each bill. Put it all in writing and be sure to include a section about your rights and responsibilities regarding ownership of products, intellectual property or records of work you perform if bills are not paid.  (Have your attorney draw up a boilerplate agreement that will work for most customers or clients.)

Keep an eye on receivables

Send out your invoices promptly at regularly scheduled intervals. Be sure the client can tell that your mailing is not just another routine reminder. You may want to stamp the envelope "Invoice Enclosed" so it doesn't accidentally get thrown out.

Send out reminder notices promptly to any client who doesn't pay within a predetermined time frame - usually ten to 30 days. 

If a client still doesn't pay after reminders are sent, have someone from your accounts receivable department call the late-payer and try to determine the cause. If you don't have an "accounts receivable department" have a spouse, secretary or bookkeeper play the role. If the customer is one you want to keep and is worth keeping, using such an intermediary will make it easier to maintain a good working relationship with the customer after the bills get paid.

If the company or individual is having a financial problem, offer them a chance to pay you in installments.

If those initial attempts at collecting do no good, consider more aggressive means to collect what you are owed:
  • File suit in small claims court. You don't need to hire an attorney to sue in small claims court, so if the client is nearby (you have to go court where the client is located), this can be a low-cost way of pursuing your claims.
  • Contact a collection agency in your state and let the collection agency tackle collection. Find out in advance what the collection agency will charge for its services and call the Better Business Bureau to make sure there are no unresolved complaints against the collection agency you plan to deal with.
  • Have the collection agency report the debtor to credit reporting agencies.
  • Retain the services of an attorney if the amount is significant enough to warrant the attorney's fees and attention.

What NOT to do

Don't tell your friends at the weekly Rotary meeting that the customer is a deadbeat, and don't post to Facebook and Twitter that your customer is a bad credit risk. If you do things like that, you can get yourself sued. You can also get yourself into legal hot water by making threats, using harassing or abusive language, making collection calls at odd hours or too often, or by making false statements about what will happen if the debtor doesn't pay.

If you have questions or concerns on this issue, do not hesitate to call Zeiler Insurance and speak to one of our customer service representatives. As an independent agency, Zeiler Insurance prides itself with quality customer service for the people of the Chicago-land area and the rest of the Midwest. Customer or not, we can review your insurance and see if you are being protected appropriately for the right price.

708.597.5900 x134



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