If you were to Google “why customers don’t pay?” you would be flooded with information on how to chase the debt and what methods would be best to use when trying to recover it. But, none of this is the answer as to why they don’t pay.
Like any other problem, in order to truly solve it, you want to find the real root cause.
There are 4 main reasons as to why customers don’t pay their Invoices.
1. Can’t Pay
These are the customers that genuinely can’t pay your Invoices. I have dealt with a few of these customers myself and more often than not, it is like trying to get blood out of a stone. They just don’t have the cash.
In order to retrieve any money from these customers, you will have to arrange payment plans suited to when they are able to pay the debt off bit by bit. Or, as a worst case scenario, take legal action.
Realistically speaking these are the customers who you shouldn’t have sold to in the first place and to avoid this happening again, it is best practice to complete a credit check on these potential clients.
2. Won’t Pay
These are the customers who can afford to pay but don’t want to. They believe that if they avoid the payment for long enough, you will give up chasing them.
As frustrating as this is, consistency is key with these customers. It is extremely important that you have a rigorous credit control process so that they are constantly being chased on a regular basis.
You need to spot this happening as early as possible and keep a track of the repeat offenders.
My best advice would be having a minimum of weekly contact with these clients. If these are clients who are getting a repeat service, stop the work until payment is made.
However, if the debt is approaching a significant amount of days overdue, don’t be afraid to take legal action.
This could either be genuine or simply a delaying tactic. If this is a genuine dispute, the client will be able to explain in detail the issue and you will be able to get this resolved.
However, they could be saying this is a dispute in order to delay the payment further. This is why it is always important to ask why there is a dispute and ask for full details. If this can’t be explained over the phone or they have waited until after the invoice has become overdue to tell you this, it is likely a delay tactic.
From previous experience, you can typically spot these customers as issues like this usually happen with them on a regular basis.
Personally, I believe the best way to handle these issues is to give the client a call, typically a few days before the Invoice is due, to make sure everything is on track for payment. This way, if there is a real dispute, it can be sorted before the due date.
This is the most common reason as to why your client isn’t paying. They will claim to have “forgotten” about the invoice and will generally only usually need a small nudge in order to make payment.
I have found that the easiest way to do this, without having to spend too much time on one client, is to make the first nudge automated. You don’t want the email to look automated and so I like to use Chaser. This way you can make your emails personable and realistic without having to spend a significant amount of time on a client who will pay when it is brought to their attention.
If the first automation doesn’t get the response you were hoping for, it is best to just pick up the phone and give them a call. This way, you can make sure there isn’t a bigger issue and maybe even get a payment date over the phone. Meanwhile, Chaser can continue to send carefully crafted email reminders that keeps you front of mind for the client and provides an audit trail.
The most important outcome is to fully understand the real reason your invoices are not being paid. This way, you can resolve issues before they become a problem. I hope you are able to implement a couple of suggestions to help you get paid on time.