Guides to Collecting Money from Non-Paying Clients

Strategy of Collecting Money from Non-Paying Clients

If you are a business owner, you have almost certainly dealt with non-paying customers, and if you haven’t yet, you will. Fortunately, you have a number of options for collecting money owing to you. However, there are restrictions regarding how to collect money that you must adhere to in order to avoid even worse consequences than not being paid.

1. Make a Straightforward Phone Call

It may not take much to recover money from clients that owe you money, especially if there is a valid and harmless reason why they have not yet paid.

Perhaps they forgot they still owed you money, for example. Perhaps they thought they or another member of their family had taken care of it already.

Perhaps they were hit by an emergency and were so preoccupied with the health problems that they forgot to contact your organization and request an extension. In any of these circumstances, a simple phone call to enquire about the situation may be all that is required to obtain your past-due payment.

2. Send a Second Bill

Your company can simply send a basic invoice statement, or a polite collection letter, requesting the cash owed. Your company can also hire an attorney if this fails to produce any type of communication that leads to payment.

Organizations may also use the services of attorneys to collect debts, according to CFPB rules. It’s worth noting that those attorneys don’t have to have “substantial engagement” in a collection action in order to issue letters. In other words, an attorney is not required to participate actively in the collecting procedure.

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3. Make Alternative Payment Options Available

If your client appears to accept responsibility for the debt owed to you but refuses to pay the total amount due at once for whatever reason, you can meet the client halfway by proposing alternate payment choices.

4. Plans for Payment

For example, provide a reasonable payment plan option. Ask the client how much money they can afford to pay each month and see if you can work anything out. Choose a payment date that is convenient for both of you. Demonstrating some flexibility on your company’s part can go a long way toward generating cooperation from your client.

You can also propose that consumers set up monthly recurring payments so that they don’t have to remember to pay their bills every month.

Although many clients are already aware with automated payments, you can’t assume that everyone is. Show how the customer has a lot of influence over how automatic payments are handled on systems that support them.

Getting a client to set up an automated payment plan is one of the safest and most reliable ways to collect money. Today, many high-quality payment platforms include recurring payment capability by default.

5. Employ the Services of a Collection Agency

When a client is inaccessible or stubbornly refuses to pay, it is usual practice to hire a collection agency. If you do decide to go this way, keep in mind that persons and businesses classified as “debt collectors” by the Consumer Financial Protection Bureau are subject to significantly tougher debt-collection requirements than you are as the original creditor.

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The Fair Debt Collection Practices Act (FDCPA), for example, prohibits debt collectors from using fraudulent, abusive, or unfair methods to collect the debt. The FDCPA, on the other hand, does not apply to original creditors; not that you’d resort to such tactics, but it’s a good example.

Other restrictions limit debt collectors’ activity, such as the fact that they can only contact a client seven times per week to collect on a debt.

Any text messages or emails they send must convey genuine notification of the debt in a way that is “reasonably expected” and in a format that the debtor can save and access at any time.

If other members of the platform can view the messages, contacting a debtor via social media messaging is completely prohibited.

They must provide a “reasonable and straightforward means” for debtors to opt out of communications.

6. Arbitration

If professional debt collection fails, or the idea of paying for such services does not appeal to you, professional arbitration is always an option. It’s a less combative option than filing a lawsuit against the client in small claims or even superior court. You might have a better chance of reaching an agreement that appeals to both of you through arbitration than allowing an impartial judge to make all of those decisions for you.

Furthermore, if your contract or client agreement with this client has an arbitration or dispute resolution provision that requires you to pursue arbitration before or instead of going to court, your options may be limited.

An arbitrator is a neutral third party who assists two disputing parties in reaching an agreement. The arbitrator does not make any conclusions for either party; instead, he or she simply mediates and fosters a more intelligent and polite negotiation between the parties. Arbitration has a number of advantages over the courts when it comes to collecting money, including being faster, cheaper, and more informal.

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In conclusion, when a customer refuses to pay, you have various options for collecting the money, including payment plans, collection agencies, and arbitration. Sometimes all it takes is a phone call or the suggestion of handy payment choices, such as automated repeating payments. Other times, bigger firearms, such as an attorney, collection agency, or arbitration, may be required.

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