How To Collect Money From Clients Who Won’t Pay (Explained)

collecting money from clients

When faced with the frustrating situation of clients who refuse to pay for services rendered, it is crucial to approach the matter with tact, assertiveness, and professionalism. While it can be frustrating and disheartening, it’s important to maintain a calm demeanor and take the necessary steps to ensure you receive the payment you are owed.

And that’s where this guide comes in, to help you explore various strategies so you know what to do if a client doesn’t pay their invoice.

What to Do If Your Client Doesn’t Pay

Remind Them with a Polite Email

Start the collection process with a polite email where you express gratitude and acknowledge the positive aspects of the business relationship. Then politely mention the overdue payment and remind them of the agreed-upon terms.

Use neutral language and avoid making assumptions about their intentions.

Emphasize the importance of payment and provide clear instructions on how to make the payment immediately. Attach a copy of the outstanding invoice and relevant documents. Close the email by expressing appreciation again and anticipate receiving their payment soon.

Here’s a helpful checklist you can use to ensure you didn’t miss anything:

  • Thank them for the business.
  • Mention the invoice is overdue.
  • Suggest it may be an oversight.
  • Explain the importance of payment.
  • Provide clear instructions for payment.
  • Attach the invoice.
  • Express appreciation and anticipation for payment.
  • Maintain composure and professionalism.

Call the Client Directly

Things happen, and some clients may have a valid reason for the delay or non-payment, like a dispute over services rendered or unforeseen financial difficulties. To better understand their concerns, offer alternative payment options like manageable installments or deadline extensions.

Keep a leveled head while you’re asserting your rights as a service provider who expects fair compensation for rendered services. After concluding the call, document all details discussed in writing and send an email summarizing key points and any agreements reached during the conversation.

Pause Future Work

Pausing future work serves two purposes:

1. It sends a message that non-payment has consequences 

2. It protects your own interests by minimizing wasted time, effort, or resources on a project that may never yield adequate compensation.

Communicate with the client professionally, express concern over unpaid invoices, and explain how this affects your ability to provide services. Politely request immediate payment or an alternative arrangement for resolving the matter.

Regularly follow up with the client regarding payment status or potential alternatives for resolving non-payment issues. Pausing work should always be seen as a temporary measure aimed at encouraging prompt payment from clients who are unresponsive or unwilling to fulfill their financial obligations.

Deny Additional Work Requests

We recommend denying additional work requests if a client refuses to pay. This establishes clear boundaries and protects you and your business from being exploited.

Communicate your decision tactfully by explaining the situation, emphasizing the outstanding payments, and providing specific details about unpaid invoices. Maintain a respectful tone and offer alternative options for settling the balance, but make it clear that they are contingent upon good faith efforts from the client’s side.

Ultimately, denying additional work requests conveys that you value your time and expertise while insisting on fair compensation for services rendered.

Send a Nonpayment Letter of Demand

This formal correspondence serves as a reminder of the outstanding debt and communicates your seriousness about pursuing legal action if necessary. Begin the letter by requesting immediate payment for the outstanding amount and including detailed information such as:

  • Contract terms
  • Relevant dates
  • Documented communications
  • Invoice numbers
  • Products/services rendered

Highlight any previous attempts you made to settle the matter amicably, outline any consequences that may arise if the client continues to ignore their financial obligation, and specify acceptable payment methods.

Encourage prompt resolution by emphasizing the benefits of settling this dispute swiftly, such as maintaining a good business relationship moving forward. Also, keep copies for your records and send them via certified mail with the requested return receipt.

Hire A Professional

If a client refuses to pay, you can hire a professional to help you recover the debt.

Look for an agency with a proven track record of successfully retrieving unpaid debts while adhering to ethical practices and applicable laws. Professional debt collectors can increase your chances of receiving payment and relieve you from the burden of dealing with difficult customers.

However, it is vital to remember that hiring professionals comes at a cost. Review any contracts carefully before signing up with an agency or lawyer so that you have clarity on their terms and conditions.

Take Legal Action

If all other attempts to collect payment have failed, you may need to take legal action. However, it’s a serious step that should be seen as a last resort, so it’s important to consider the potential costs and benefits carefully. We recommend contacting an attorney specializing in contract law or debt collection to evaluate your case.

6 Tips to Avoid Unpaid Invoices

1) Consider Vetting Potential Clients

If you provide high-ticket products and services or typically bill in arrears, you may want to consider properly vetting new clients before signing them. Running a quick business credit report can give you a behind-the-curtains look at how they’ve handled paying other companies/service providers.

2) Set Clear Terms and Expectations

Setting these terms in advance and getting both parties to agree to them creates a solid foundation for initiating collection procedures if necessary. Outlining any additional conditions related to non-payment situations can provide additional leverage when dealing with clients who won’t pay.

3) Send Invoices in Advance

Aim to send invoices 1-2 weeks before the agreed-upon completion date, this will help minimize the chances of delayed payments. Include all relevant details and aim to deliver invoices at least one to two weeks prior to the completion date. Consider using electronic invoicing, as many will notify you when your client looks at their invoice.

4) Make Submitting Payments Easy

You can improve your odds of getting paid on time by making it easy for clients to pay you. We’ve seen the most success with companies that:

  • Offer multiple payment options
  • Use an automated invoicing system
  • Send personalized payment reminders
  • Provide clear payment instructions
  • Set recurring payments

5) Set Recurring Payments When Possible

Recurring payments are a strategic way to ensure consistent and timely payments, just make sure you:

  • Clearly communicate the terms and conditions
  • Outline the frequency of payments (e.g., monthly, quarterly)
  • Specify the dates funds will be deducted from their accounts
  • Notify your client with a price, product, or service changes

6) Include Late Fees in Your Terms

Including late fees in your payment terms is essential for discouraging clients from falling behind. Late fees should be clearly communicated, reasonable, and applied consistently. This helps to protect you against non-payment while also preventing favoritism.

Do’s and Don’ts of Collecting Late Payment from Clients

Do Communicate Clearly: Maintain clear and open communication with clients during payment collection, including the amount due, due date, and any applicable fees. Correspond professionally but firmly, emphasizing the importance of timely payment.

Don’t Get Emotional: Stay calm and assertive when clients don’t pay on time. Avoid aggressive language that could damage your relationship.

Do Offer Flexible Solutions: In some situations, clients may experience genuine financial difficulties that prevent them from making timely payments. If they have a good track record, you can show empathy by providing flexible solutions like installment plans or extended deadlines for full payment, demonstrating your willingness to collaborate while protecting your interests.

Don’t Make Assumptions: Don’t jump to conclusions about late payments. There could be legitimate reasons. Approach discussions with an open mind and let them explain.

Do Follow-Up Consistently: Politely follow up with overdue clients via email or phone. Maintain a professional tone and emphasize the importance of payment.

Don’t Hastily Threaten Legal Action: Don’t threaten legal action before trying other options. Start with a friendly reminder and escalate if needed. Only mention legal action as a last resort.

Do Document Everything: Keep detailed records of all communication related to payment collection. This can serve as evidence and provide a timeline for you or your lawyer to reference.

Don’t Give Up Too Soon: Persistence is crucial when collecting late payments. Even when clients are unresponsive or difficult, keep pursuing the matter until a resolution is reached through payment or other agreed-upon terms.

Conclusion: What To Do When A Client Doesn’t Pay

There are several steps you can take if a client refuses to pay, including:

  • Remind your overdue client with a polite email
  • Call your client if they ignore multiple emails
  • Minimize wasted time, effort, and resources by pausing future work
  • Protect yourself by rejecting additional work requests
  • Send a demand letter for nonpayment
  • Hire a professional
  • Take legal action

While dealing with clients who are reluctant to pay can be frustrating, you have to do your best to be calm, polite, professional, and consistent throughout the entire process. Do your best to document relevant communications to protect yourself and give yourself the highest odds of winning a legal case – if it gets that far.

If you’re tired of managing delinquent clients, let Debtor Inspector handle your collections so you can concentrate on your core business. Our custom accounts receivable solutions efficiently manage overdue clients to improve your business’s cash flow.


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