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When a client pays late or not at all for business services

On Behalf of | Jan 24, 2022 | Business Law

Serving your market means serving your clients. This is an essential part of any business. But what happens if those clients do not pay for your services on time or at all? Ideally, this should not happen, but it often does.

By signing a contract with you, the client should understand every detail of the business relationship. This includes paying debts on time. Failing to do so may lead to a major disruption of your balance sheet and affect the future of your business.

Have a detailed contract, implement late fees

Late-paying clients are bad for your business. When they do not pay, you may be forced to delay your own paychecks as well shrink spending on inventory. Collecting payments provides effective cash flow, and when that does not happen, you need to determine the best ways to work with such clients.

Here are some things you can do and consider:

  • Clarify detailed payment terms: Before beginning business with any client, make sure they understand the details of your working relationship. Client contracts should include information regarding payments, including timelines, rates and the penalties for late payments. A client should clearly understand its financial responsibilities.
  • Implement late fees: If a client signs a contract, they agree to abide by the terms, and that includes paying you on time. Since late fees are defined in that contract, business owners should not worry about offending the customer who must understand their accountability on financial matters.
  • Drop these late payers as clients: Cutting ties with such clients often proves to be a solid business decision. Receiving late payments may lead to any business delaying payment on their own bills.
  • Take them to court or settle: Litigation is not inexpensive. Understand how much you are willing to pay for legal fees as well as determine how much time and energy you are willing to devote. A settlement would allow you to secure the money much swifter.

Resolution is what you want when a client fails to pay accounts receivable. Do your best to avoid this situation but tackle it if obstacles surface.

Contacts and agreements

You need that money for the services provided to clients. Remember that failing to collect those payments will harm your business. Contracts and agreements can help avoid disruptions to client relationships and your business.

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