What can you do if the customer will not pay?

On Behalf of | Dec 21, 2020 | business litigation

It is axiomatic that customers must pay for the product or services provided by a business.

This might seem simple, but California contractors and business owners know that non-paying customers are a common risk to the business that could result in complex legal matters.

THREE FACTORS TO CONSIDER PROACTIVELY

There are measures business owners can take to prevent late or missed payments. For example, you should:

  • Discuss the finances and estimated costs with the customer before beginning the project;
  • Implement a written policy of late fees, and inform customers about this policy; and
  • Make sure your invoice is clear before sending it to the customer.

Addressing these details can help avoid issues with nonpaying customers. However, even if you take precautions, there are many variables that impact an individual situation.

WHAT STEPS SHOULD YOU TAKE IF CUSTOMERS WILL NOT PAY?

Unfortunately, you cannot control every element of a business transaction or project. Even so, business owners must take action as soon as possible to recover payment.

In these cases, you should:

  1. Send a reminder: If the customer has not paid the invoice, you should send them a reminder by email or phone call. It is also helpful to send another copy of the invoice to the customer. Be assertive, but not aggressive with the customer.
  2. Consider a compromise: In some cases, a customer cannot pay. While it is still necessary to recover payment for the services provided, you may have the option to negotiate a payment plan with them, if it fits in the business budget as well.
  3. Consult an attorney: There are several strategies to recover payment, but some customers might still refuse to pay. They might claim the work is not fulfilled, or that they lost the invoice. Then it might be necessary to take legal action, such as filing a formal demand or ultimately filing a lawsuit. In these cases, you should consult an experienced business attorney to determine the next steps you should take.