What Do I Do If a Customer Refuses to Pay?

Have you ever had a customer who refused to pay for goods or services you provided? Sadly, it happens to all businesses at some point. Unpaid invoices can cause significant disruptions, especially for small businesses, where cash flow is critical to daily operations. In fact, a report by NatWest found that nearly 27% of UK SMEs are owed between £5,000 and £20,000 in unpaid invoices. But what do you do when you’ve done your job, but the customer refuses to pay you what’s due?

What to Do When a Customer Refuses to Pay for Completed Work

There are a few reasons why a customer might not pay for your work. Understanding the root cause can help you address the issue more effectively and reduce your stress too. A few of the more common reasons for non-payment include:

• Being unhappy with the quality of service
• Financial difficulties preventing payment
• Payment delays due to monthly billing cycles or system issues

Sometimes, customers may display warning signs before the work is even completed, such as avoiding payment discussions. Regardless of the reason, you deserve to be paid for your hard work. Below are five tips to help you manage and prevent situations where a customer refuses to pay.

First Things First

Remain calm and professional. Politely ask the customer why they are disputing the payment, and review your contract to ensure both parties have met their obligations. Document all communications, as this can help if the situation escalates. Keep communication open and professional. Show a willingness to negotiate payment terms if the customer is facing financial challenges. Understanding their situation can help maintain a positive relationship moving forward.

Communicate Clearly with the Customer

When a client refuses to pay, address their concerns as quickly as possible. Sometimes, the issue might be simple, like an error in the invoice, which can be easily corrected. Maintaining clear, documented communication—including emails and payment demands—can help if you need to escalate the situation.

Offer More Time to Pay

Occasionally, customers may struggle with financial difficulties and need more time to settle their debt. In such cases, consider offering a payment plan. This not only helps you recover what you’re owed but also shows good faith, which can strengthen your business relationship. However, if they still don’t pay, you can explore other options such as hiring a debt collection agency.

Instruct a Debt Collection Agency

If you’re unsure how to proceed when a customer refuses to pay, using a debt collection agency is a cost-effective solution. Legal action can be expensive and time-consuming, whereas a debt collection agency may offer fixed-fee services to recover your debt without wasting your time and energy. For expert advice on debt recovery, contact our team today.

Prevent Future Non-Payment

Preventing future non-payment is just as important as dealing with current cases. Timely payments are essential for business growth, and there are steps you can take to minimize risks, such as:

• Conducting credit checks on customers before working with them
• Sending regular payment reminders
• Offering payment plans to ease cash flow issues

Implement Clear Payment Terms

Setting clear payment terms in your contracts helps protect your business. These terms should specify payment amounts, deadlines, and any penalties for late payments. This gives you a solid foundation to fall back on if a customer disputes payment and strengthens your position during negotiations.

At Debtcol, we support businesses with all stages of the debt collection process. From working with you to recover single or multiple overdue invoices, to putting policies in place like company monitoring, credit checks, company health checks and investigations to make sure you’re fully protected every step of the way. If you’d like to find out more, just get in touch with the team today.