How to Deal With Non-Paying Customers

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Prompting customers for payment can be a stressful and dreadful experience for a lot of small business owners. However, you must remind yourself that you are not running a charity.
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How customer payments work

The accounts receivable section of your balance sheet infuses cash flow into your business. Your goal is to keep the open balances to a minimum; otherwise, you are extending credit to your customers. The best practice is to require full payment before providing the product or service (or as much as possible). 

TIP: If your customers are leery of giving you money before receiving the product or service, show them a copy of your business insurance policy and provide the contact information for satisfied customers.

READ MORE: Glossary: Basic Accounting Principles You Need to Know

How to create an invoice

You should select accounting software that has an easy-to-use invoice generator. If you provide on-site services, then it's best to pick a product with a mobile application so you can ask for payment when you're out of the office. You can send an invoice to your customer before or after performing the service, whichever scenario complies with your contract terms.
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Stepping up your collection efforts

When you have a customer or client who cannot resolve their past due balance, then you need to prepare a collection letter. A sample notice includes the amount owing, service period(s), payment remittance date, and what will happen if the delinquent balance remains unpaid.

READ MORE: What price should you charge your customers?


DISCLAIMER: Please consult with your accountant, attorney and financial advisor before implementing any information displayed on this website. DIY research does not replace the advice of a licensed professional who has thoroughly reviewed your file.