Client Refuses to Pay? Here’s What You Should Do

Client Refuses to Pay Here’s What You Should Do

It’s been a common issue nowadays for business owners: more and more clients refuse to pay for services or goods for one reason or another.

While it is a customer’s right to question and refuse payment when they are dissatisfied with a product or service, as long as you are not in the wrong then you would have no worries about demanding payment from a client.

No matter how long you have been a business owner, whether it’s a year or a decade, you are bound to come across a client (or two) who find it in themselves to be dishonest. It is part and parcel of running a business, unfortunately, but there are steps you can take to avoid being in this situation as much as possible.

Prevention is Better Than Cure

Don’t let it come to a point where a client has unpaid invoices. The best thing you can do, especially if you are a small business owner, is to require payment upfront whether a day before the delivery of goods or services or on the day itself.

There are portable credit card facilities that can easily take credit or debit cards if the client has no cash in hand. While upfront payment is certainly the most direct approach to avoiding the occurrence of unpaid invoices, there are goods and services that just don’t allow this kind of a payment scheme.

Sometimes a down payment of at least 50% may be required. For instances or businesses that can’t offer upfront payment, before dealing with a new client it is best to do a credit history check. Doing one is fast and very convenient. It also won’t cost much. It’s a small price to pay to see whether the potential client has the capabilities to pay any unpaid bills.



A full credit history report can tell you a lot about the person such as the different loans he has taken out, how much he has paid them off (or if he has avoided payment altogether). Someone’s credit history report can help you decide whether or not someone is worth dealing with.

Don’t hesitate to run a credit history check on someone you just met. Think about it this way: would you lend a complete stranger thousands of dollars and expect them to pay you back within a given time frame? All too often many business owners believe that new clients come to them with the best of intentions. This isn’t always the case.

As the adage goes, “An ounce of prevention is worth a pound of cure” and in the case of business owners, all it takes is a bit of digging up and asking for upfront payment.

Legally Binding Terms of Trade

Drafting professionally and legally binding written terms of trade is another great way to protect yourself and your business. The terms and conditions of your transaction are detailed in these
terms of trade and can be used in court when the need arises.

Details like when payment is due, how you would like to be paid, what happens when the client misses a payment (incur interest fees or overdue fees), and in the event of prolonged missed payment, how you would proceed to recover any amount due to you. This could include hiring a debt collector and going to court. You could outline that the client is also responsible for paying any legal fees and the debt collector’s fee.

This terms of trade becomes legally binding when both parties sign the agreement.

Simple and Effective Steps to Recover Debt


Automated reminders

Set up your email to send a reminder a day before or on the day of when the payment is due. This gives off the impression that you are updated with your books and you know that a client’s payment is now due.

Give them a call

If the email didn’t work its magic and they have not paid yet, then it’s time to have a quick chat with them. When you have a chance to talk to them, ask them when they intend to pay their unpaid invoice.



Avoid feeling bad about giving a client a call. All too often many business owners find it distressing to be in a situation like this for fear of ruining their relationship with the client. Detach any emotions you may have and instead focus on your business. It is only fair that you request that they pay you.

Letter of Demand

The client will know that you mean business you send a letter of demand. This will serve as a final notice and will inform your client that unless payment will be made, you will be hiring a debt collection agency and that this could possibly be handled in court.

At this stage you would like to remind them that failure of payment will affect their credit score.

Debt collectors

If you have taken the three previous steps and the client has not paid up, then it is time to call professional debt collectors.

A debt collection agency will be recovering debt on your behalf while you continue to work on other projects and focus on your business. Having a debt collector can take a load off your chest so you don’t have to worry about running after clients who have failed to you.

A well-established agency practices a “no collection, no fee” policy. This means that they get a certain percentage from the recovered funds. Don’t worry about paying a debt collector — the
client should be able to cover that since it has been stated in the terms of trade.

Never hesitate to contact a debt collection agency when you have a troubling time recovering debt. Remember that debt can easily be recovered when you have the right people on your side.

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