What to Do When Your Client Doesn't Pay

Most small business owners and freelancers will come across clients who are slow or late payers. But what do you do if a client simply refuses to pay and ignores your requests to settle an invoice? While it can be a frustrating time, there are several steps you can take to make sure you're in the best position to get a positive result, not to mention more drastic measures if they become a real problem client.

Client Onboarding

While it may feel like you can't do anything to avoid late payments until after an invoice is overdue, putting processes in place to ensure clients are aware of and have agreed to your terms when they first start working with you can make a difference. That being the case, it's always a good idea to draw up a business agreement for each new client. This will make sure you have a written document in place that states the client's requirements and how you'll fulfil them. If the client claims work has not been completed as expected, you can refer them back to this document. You should also include how and when you expect payment to be made.  

How to Prevent Late Payments 

In addition to this, you can take steps to minimise the opportunities for late payments. This includes

1. Timely invoicing

If you don't invoice until weeks after a job has been completed, the work you did will not be front of mind for the client, which means paying your bill likely won't be either. Sending your invoice promptly can lead to quicker payments.  

2. Accurate invoicing

It's also important to ensure that all the information your client needs to make payment is easy to find on the invoice and it's all correct. Be sure to include information such as your company name, bank details, amount due, and a clear description of the work carried out. You can find out more about what should be on an invoice in our blog What to Include on an Invoice.  

3. Make payment easy

Also, try to make payment as easy as possible. This could include offering multiple payment options and having the details for them all in your invoice, or even offering online payment through services such as PayPal.

4. Utilise accounting software

All of this and more can be done by issuing invoices using accounting software. Email templates will make sure each invoice contains the correct information to be sent quickly. Overdue invoices will be highlighted so you know who to chase when and PayPal integration in tools such as AccountsPortal means you can automatically include a Pay with PayPal button on each of your online invoices. This will allow customers to make payments directly into your PayPal account in a matter of seconds.  

How to Chase Late Invoices 

Even if you do all of this, there will always be clients who don't pay on time, so a robust system to identify and contact them is vital. Again, accounting software can help with alerts highlighting that a payment is overdue. It's essential to act as soon as an invoice is overdue and have a formal structure to chase payments so that nothing gets missed. 

The first step when chasing payment is a simple reminder email or phone call – be polite and patient as maintaining good relations with the client is key. They may need a few such reminders, so again, stay polite but firm and try to get them to confirm when payment will be made. If you're doing this by phone, remember to log details of calls, so you have a record. For many clients, this will be sufficient. If not, there are more formal steps to take.

Can a Client Withhold Payment? 

A client can withhold payment if they simply refuse to pay, but the law will be on your side, assuming you've met all the terms of your contract. Taking the legal route to force payment should only be undertaken if you're having serious problems with a client, and you should always take legal advice before acting. In the meantime, issue the client a late payment letter. This can take several forms, from a polite notice to a clear reminder and a final warning plan.

How to Write a Late Payment Letter 

Depending on the stage you're at with a client, it's a good idea to have a few late payment letter templates on file.

An initial letter should be polite and clearly explain the situation – when payment was due, what it was for, including any reference numbers, payment options and next steps, such as giving the client the opportunity to contact you to discuss or pay within a specific timeframe. 

If this doesn't have the desired impact, the second letter should be more firm in tone, clearly stating your payment terms and perhaps even government rules around charging interest and debt recovery. Also, include a cut-off date for payment.

The final letter should include all of the above and highlight any consequences of failing to pay, such as your debt recovery arrangements or planned legal action, and include any additional charges that have been incurred, such as interest on the overdue amount.

You can view an example of a late payment letter here.

Still Not Paying? How to Issue a CCJ

The final step in making a client pay is to start court proceedings against them, but remember, there's still no guarantee that you'll get paid if you do this. It can be worth looking into the trading position of the client before you take this step to see if they're able to pay, or you could end up even more out of pocket.

If you do opt to start court proceedings, the route you take will depend on the value of the debt. If you're owed less than £10,000, you would take your client to the small claims court; up to £25,000, you'd be dealt with by the county court; and any more than this, you'd be in the High Court. You can make a claim yourself via the government website or instruct a solicitor to file on your behalf. 

Court fees will apply depending on the value of the claim, but they can be added to your claim if the court finds in your favour. If this happens, the client will be ordered to pay up within a month. If they don't, you can enforce the judgement, for example, by asking the court to send bailiffs to collect the money.

The court will also likely give you the option to try mediation rather than have a hearing, especially for smaller claims.