Written by: Amanda Rose, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
While many entrepreneurs avoid payment plans because they are afraid of running into clients not paying, the truth is, if you’re clear on your niche, firm in your boundaries, and selective with your clientele, payment plans make your high-ticket offers more ACCESSIBLE and it’s rare that clients default on their payments.
Your dream clients honor what you do, and they WANT to compensate you!
But… what happens when someone’s payment bounces or is late?
GIVE THEM THE BENEFIT OF THE DOUBT
Don’t jump to conclusions or assume the worst.
Maybe their card expired and they forgot to update it.
Maybe, if it’s an international payment, their bank protection system blocked the charge (yes, even if it was successfully charged before, it can sometimes randomly be blocked on future charges).
Maybe they forgot to pay more down on their card, or the latest payment didn’t post yet, so there’s just no room on the card for the charge to be posted yet.
Maybe they had a tough month, unexpected expenses (dental work, car repairs, etc.), or they ran into financial issues (lost their job, lost a top client, etc.) and are a little short on cash.
9-times-out-of-10 they aren’t deliberately stiffing you OR even aware of theirs payment issue!
Reach out, via e-mail, phone, or DMs (however you normally connect with that client/customer) and politely let them know their payment didn’t go through. Let them know how they can update their card information, or that if they are under financial pressure to reach out to you to work something out.
Typically, you’ll hear back with an apology and the payment will be made promptly, or an explanation of why you haven’t been paid and expected payment date, or a request to temporarily adjust the payment plan due to unforeseen financial struggles.
WORK WITH THE CLIENT
You know who gets paid LAST? The jerk who won’t stop riding you.
Don’t harass or chastise someone for late payment. It’s usually an honest mistake or even a tech hiccup they couldn’t prevent.
And if someone is short on cash, being mean to them won’t make them get the money any sooner.
People usually feel very guilty if they are late or have defaulted on their payments. Be kind to them, try to work with them, and find a solution that allows them to continue to pay off their debts.
WHEN THEY HAVE GHOSTED YOU
You’re trying to reach out, but you’re not getting any responses. Before you get a collections agency involved, which takes a large portion of the profit margin, be sure to give it time while attempting to resolve the issue through your own business.
Make sure to give it some time (family emergencies or travel may keep people unavailable or unable to check their e-mail, social media, or even phone calls).
Try reaching out by multiple methods.
1. Late payment notices
If they are 30-days late (or more), send a late-payment notice, with the invoice number, amount owing, date it was due, and kindly request payment as soon as possible.
After another 30-days, if you still have not heard anything, send a follow-up.
At the 90-day mark, send a formal “Final Notice Past Due” letter, via regular mail, with signature upon arrival (this gives you proof that the recipient received the letter should things escalate to the courts). This notice should inform them that this is the last chance to pay by a specified date before their account will be sent to collections.
2. Call, call, call… and call again!
As well as sending late payment notices, getting your delinquent client on the phone is the best way to resolve the issue. It’s difficult for someone to avoid paying you while they’re talking to you. It creates that human connection; you’re no longer words on the screen or on a piece of paper, you are a real person.
Try calling once a week to get hold of them during the 90-days following a late payment.
GETTING A COLLECTIONS AGENCY INVOLVED
If you’ve tried everything you can to get hold of a client, and no response has come, and the amount owing is large enough to merit going after, you’ll likely want to enlist the help of a reputable debt collector.
What to look for (or ask them about):
Are they familiar with your type of business/industry?
Not all businesses are the same, and anyone who claims the processes are the same across the board is not someone you want to have working on behalf of your company.
Do they have liability insurance?
If they do not have liability insurance and the client feels harassed by the debt collectors, who are working on your behalf, the client may try to sue your company.
Are they licensed to collect in the geographic location of the client?
Every jurisdiction is different, and to follow legal protocols, you want to make sure the agency you hire is licensed to do the work in the area you need them to work in. With more and more online businesses serving international clients, this question is a top priority.
What’s their BBB rating?
Do some due diligence and check the Better Business Bureau for its evaluation of the collections agency you intend to hire.
What is their process for collections?
How do they pursue the debtor to get them to pay up? It is important to know that they follow a good protocol such as: Starting with e-mails and/or letters, progressing to phone calls, should that fail escalating to the court system so that they are given approval in taking actions such as placing a lien on the debtor’s home/properties, forcing seizure of assets, and being able to impact the debtor's credit score.
What is their pay structure?
Ideally, you DO NOT want to pay anything up-front. There is no guarantee that an agency will be able to collect. Most good agencies offer their services in exchange for 25-50% of the profits they collect, with no up-front cost.
Do they offer Skip-Tracing?
Some debtors try to move to a new residence as a means of attempting to escape paying their debts. Skip-tracing services are when the creditors specialize in tracking down these types of debtors.
OTHER OPTIONS
Instead of employing a debt collection agency, you may opt to file with a Small Claims Court or Hire a Lawyer to help you handle what a debtor owes you.
PROTECT YOURSELF UPFRONT
Make sure to take the necessary steps upfront to protect yourself against potential default payees:
Use contracts so that you have legal recourse should a client default
Specify payment terms and late fees
Use automatic payment systems, such as Stripe, to help process and track income
Keep track of non-formal written agreements (these are still binding, but you’ll need to reference the source and provide proof)
Put any verbal agreements into writing and have both parties sign
Amanda Rose, Executive Contributor Brainz Magazine
Amanda Rose is the CEO and founder of The Infinite Power of You INC., a Business, Wealth and Mindset Coach, Multi-Published Multi-Genre Author, Motivational Speaker, Course Creator, and Actor. Her corporation serves entrepreneurs worldwide, with her unique approach that focuses on understanding each client’s individual strengths and guiding them in building their own methodology, rather than attempting to get them to adapt to a specific mold.
Amanda has been a sales expert for over a decade, having experience in door-to-door sales, retail, live sales presentation, network marketing, and online product and service sales, which allows her to bring extensive insight to her clients. Amanda has been featured in many publications and news articles for her work, including FOX, CBS, Yahoo! Finance, and NBC, and was recently recognized with the BRAINZ Global 500 Award and the CREA 2021 Award. Amanda passionately works to help entrepreneurs succeed through her Corporation as well as within her Facebook Community.
