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How to deal with clients who won’t pay


As accountants in practice, these are the clients that keep you up at night – the ones who won’t pay.

You will probably find that they are also the most demanding of clients and, looking back on it, you probably feel you were being set up for failure – so the client could “legitimately” claim you failed to deliver on your side of the arrangement. Going back over it, you will see an email trail of demands, reprimands and other signals of a dissatisfied customer (so that in the event of a legal dispute, the paper trail supports the customers’ version). This can happen, even though you did everything in your power to deliver what was promised.

In some cases, the non-paying customer has hit a rough patch, and simply cannot pay. You like the customer, they do not complain about your service, but they simply cannot pay.

So there’s no one-size-fits-all approach to this. BPlans has come up with a useful list of actions you can take to recover your money, and you will have to see which ones best suit your circumstances.

  1. Call Daily: Being persistent but polite is extremely effective. Phoning every day, moving up the chain of command until you get the key decision-0maker, is a proven strategy to get your money. Never lose your cool. But polite, but relentless.
  2. Give the client options: Oftentimes the client isn’t avoiding payments simply to be nasty, but they have internal cash flow issues. Offer them a payment plan over a number of months. Again, keep it polite.
  3. Send out a lawyer’s letter: This would be the next step up in the frustration chain. When nothing else works, a tersely worded legal letter generally gets the attention of the non-paying company.
  4. Getting in the collections agency: Again, this would be done when all other avenues have failed. You would have to pay a percentage of the receipts to the agency, but they have systems and lawyers to help them get the job done. It’s not a guarantee of success, but it does improve your odds of seeing some money, particularly larger amounts.
  5. See if it’s worth the effort: If the client is giving you the run-around and ducking your calls, you may think it’s time to call a lawyer or a collections agency, but you should decide whether the costs are worth it. For smaller amounts, perhaps not. For larger amounts, yes. Also, as a manager you may find greater peace of mind just writing off the amount owed so you can concentrate on growing your business.
  6. Offer the client a discount and settle up quicker: This may a cheaper route than getting a lawyer or a collections agency.
  7. Get a bulldog for a collections clerk: If takes a special kind of personality to do this job – someone who doesn’t mind phoning 100 times to get through to the person in charge of payments. Someone firm, who you know will never go away, no matter how rude the person on the other side is. Such people are pure gold in a company. See if you can appoint one to do nothing else but chase up bad debts.
  8. Show understanding: While the bulldog works on seriously delinquent payers, the more sympathetic type is better for companies that are experiencing serious problems. You want an understanding voice on the other end of the line for these types of situations, someone who understands the problems the other company is going through, while making it clear that the non-payment of the bill impacts the ability of our firm to survive too.
  9. Be flexible: Offer a range of different options, be understanding, and seek out ways to prevent this happening in the future. On many occasions the client, if tenderly handled, gets through the difficult patch and wants to retain your services in the future. But if you bark and howl at them over your late payment, they may go elsewhere for business. As always, some sensitivity is called for. No one of these methods will solve non-payment for you. See which one best fits the circumstances, and use that one. Only adopts a more legalistic approach when all other means have failed.
  10. Blacklist the client. There is a legal process to follow to do this, such as an obligation on you to send a Section 129 letter of demand (in terms of the National Credit Act) which informs the client of the amount owing, and provides a brief period on which to settle – otherwise legal action will result. You have to wait 28 days for a response from the client, and three months must elapse before a listing can be logged. These notices (such as “final notice”, “handed over”, “repossession” and “bad debt written off” remain listed on the credit bureaus for one year).