You know that saying ‘you learn from your mistakes’? Well, sometimes you do learn but it doesn’t mean the decision making is any easier.
So, the dilemma is:Â what do you do when your customers don’t pay on time even though you have had discussions, you have agreed a way of working out the payments and then all of a sudden they stop taking your calls or not responding to emails?
Well, in the past this was the situation we were in and we naively thought that the customer in question would clear his debt and all would be well again. How silly were we? He ended up leaving us, still owing us a considerable amount of money, was verbally threatening on email and telephone and was so horrid that we ended up giving him the information he required to set up his website with someone else just to get rid of him. That was a year ago and to this day we have still not received the money even after spending more money asking a debt collection company to get involved.
So, you can imagine how awkward we now feel when we find ourselves in a similar situation with two more customers. Long standing customers, one of them is relatively local, and we are in the position where if we take the websites down we are effectively cutting off one of the major streams of income to their businesses. Whilst this pains us and makes us feel uncomfortable, from a business point of view we are in the position of if we take their website offline then we are almost guaranteeing that the relationship is now beyond repair and we are probably going to lose their business.
Well, we had to toughen up, one website went offline yesterday – and amazingly enough the customer has got in touch – the other website is due to go offline tomorrow – we will see what happens then. In the grand scheme of things, it is not cost effective having to spend time chasing payments so what do you do as a small business owner who doesn’t like to upset people?
I don’t know the answer! As always, keen to find out how you deal with this situation because I am sure we are not the only ones.
Hi Katie,
I guess my first question regarding the above would be did you credit check the customers prior to doing work with them? I know credit files can sometimes be meaningless but nonetheless they can also prove invaluable in viewing past patterns of non-payment.
I think the general economy just now is also paying a big part so it makes it extra important to try and make sure you keep in touch with clients and that you chase overdue bills as soon as they become due.
Think about offering your customer the chance to pay by standing order or direct debit if feasible and it’s for recurring payments.
If the debt is going bad and you’ve tried all reasonable means to secure payment then you really do need to take the initiative and start to threaten legal action. Send a letter before action which gives the debtor a final seven days to make payment after which you will go legal. When you say you are going legal you have to 100% convinced that you will carry this through.
You mentioned about a debt collection agency as well. Just bear in mind that these aren’t all the same. Many of the major players really want to get it going legal so they can make their fees which is sad but reality.
We work in this area every day and it’s becoming a growing part of our business so if you need anyone as a sounding board for what to do next then you know you can just drop me an email
Barry, I really appreciate you taking the time to give some guidance on our dilema. Sound advice and also further to what someone said to me on Twitter regarding this, we have a pretty good process for contracts/payments in the first instance but it is these ongoing fees that seem to make for the issues these days. With new customers now we lay out guidelines and are more strict, the problems we face nowadays are from ‘legacy’ customers who have been loyal customers for many years to my mind have become complacent that we won’t do anything if they dont pay on time. Just turned another website off today – so will see what happens!
I will definitely be pointing people in your direction if we have further issues and once again thank you for your advice – it is most appreciated.