When Your Customers Don't Pay

Whether you have a lot of trouble collecting from your customers depends on how you run your business. Your pricing strategy, the target markets you choose, the quality of your products and the business image you present all influence how reliably your customers will pay you.

If you compete on price and operate in a retail environment you will have to cut corners on quality and you'll attract many people who are looking for bargains and who will have trouble paying even the low amount you're charging. They'll then use the lack of quality as a reason to avoid paying up. If you choose to run this kind of business it is important to factor in anticipated losses from non-payment and costs for credit verification, bounced cheques and bad credit cards.

If you decide to target up-scale markets with high quality products your customers are likely to have the ability to pay but even here you will run into people who just will not send in that cheque. Cases like this are even more annoying because you know you have delivered a high quality product and that the customer can, in fact, pay the bill.

No matter what your business, there are some basic guidelines to observe when dealing with non-paying customers. Don't forget, you're not out to punish these customers or make trouble for them - you want to get as much of your money as possible from them and limit possible future losses.

1. Keep the business relationship going. Don't be rude or send that final letter telling them to go to hell. Although it may be satisfying to tell them off, it means that you don?t get paid and don't get any more business. Keep on cordial business terms.

2. Persistence often pays off. Keep sending reminders, statements and call them as often as is justified by the amount owing.

3. Be flexible. Accept partial payment or do more business with them if they?ll pay in advance plus pay some of the outstanding balance. Accept that you may not see any of this money and then try to get as much of it as possible.

4. Don't cut these customers off but do insist on payment in such a way that fully protects you, in advance with a certified cheque if necessary. Also adjust your pricing to reflect the higher cost of doing business with such customers. OK, they may not be the ideal customer but if they want to do business with you, set appropriate terms and make it worth your while.

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