How to Collect Payment from Clients That Aren’t Paying: A Strategic Approach
Late payments or non-payment from clients is one of the most frustrating challenges businesses face, especially for recruitment agencies where cash flow is critical. Unpaid invoices can lead to operational slowdowns, financial stress, and even disrupt your ability to take on new business. So, how can you handle clients who aren’t paying without damaging your relationship or spending too much time chasing them up?
In this blog, we’ll explore a strategic, step-by-step approach to collecting payment from clients who are dragging their feet.
Set Clear Payment Terms from the Beginning
The best defence against non-payment is a solid offence. Before you even begin a project, have clear, detailed payment terms written into a contract or agreement. Ensure that both you and the client understand:
- Payment deadlines (Net 30, 60, or 90 days)
- Accepted payment methods (bank transfer, credit card, PayPal, etc.)
- Late payment penalties (interest charges, fees, or halting work)
- Milestone payments for larger projects (partial payments after completion of stages)
Having everything in writing eliminates excuses like “I didn’t know the payment was due” or “I’m not sure how to pay.”
Send Friendly Payment Reminders
Once the payment deadline has passed, the first step is to reach out with a friendly reminder. Keep your tone professional but polite—you want to maintain a good working relationship.
Here’s a quick example: “Hi [Client Name], I hope you’re doing well! I just wanted to remind you that Invoice #123 for [Amount] was due on [Due Date]. Could you let me know when we can expect the payment? Thanks so much for your attention to this!”
This serves as a polite nudge and assumes that the client may have simply overlooked the invoice.
Escalate with Firm Follow-Up Emails
If the first reminder doesn’t result in payment, it’s time to escalate the tone. Send a more direct follow-up message. Keep it professional, but emphasise the urgency.
Example: “Hello [Client Name], I wanted to follow up again regarding Invoice #123, which is now [X days] overdue. We kindly request that this be settled as soon as possible to avoid any potential disruptions. Please confirm the expected payment date at your earliest convenience.”
By this point, you’re signalling that payment is overdue, and it needs to be handled promptly.
Call the Client Directly
Emails can sometimes be easily ignored or lost in an inbox, but a phone call is harder to overlook. If after several emails you’re still not getting paid, give the client a direct call. Politely but firmly explain the situation, confirm the invoice details, and ask when you can expect payment.
Stay calm and professional. A phone call makes the payment issue harder for the client to ignore while giving you an opportunity to address any confusion or objections they might have.
Offer a Payment Plan
Sometimes, clients delay payment because they’re facing financial difficulties. If you’ve contacted them and they explain that they’re having trouble making a lump-sum payment, consider offering a payment plan. This shows flexibility while still ensuring you’re getting paid.
Break down the total amount into manageable instalments over an agreed period, which may make the client more likely to start paying.
Add Late Payment Fees
If you’ve included late payment fees in your contract (and hopefully you have!), now is the time to apply them. A reasonable late fee serves as a deterrent against further delay and can encourage clients to prioritise your invoice over others.
Notify the client that their overdue invoice is now subject to late fees, and make sure you specify the amount and how it will accumulate over time. This can push the client to make a payment before the fees start piling up.
Pause Ongoing Work
If you’re in the middle of a project and the client refuses to pay an overdue invoice, consider pausing any ongoing work until the payment is made. Clients are often more motivated to pay if they know their work is going to be halted.
Notify them formally: “Due to outstanding invoices, we will be temporarily pausing all work related to [Project Name] until payment has been received. Once payment is confirmed, we will immediately resume work.”
This puts added pressure on the client without fully breaking the relationship.
Take Legal Action (Only in Severe Cases)
In extreme cases where the amount is significant and the client refuses to pay, you may need to take legal action. This can include small claims court, hiring a solicitor, or pursuing arbitration. Be mindful that this route can be time-consuming and costly, so weigh the potential benefits carefully.
Learn from the Experience
Lastly, take every unpaid invoice as a learning opportunity. Did the client show signs of financial instability early on? Were your payment terms unclear? Could you have done more due diligence before starting the project? Review your client selection process, contracts, and payment procedures to prevent the situation from happening again. And remember, not all business is good business.
Outsource Collections to an Experienced Provider
If repeated attempts to collect payments from a client have been unsuccessful, or if managing overdue invoices is becoming a burden on your time and resources, outsourcing your collections to an experienced provider like Simplicity can be a game-changer. Simplicity offers comprehensive debt collection services as part of a broader recruitment finance solution, ensuring that your cash flow remains steady and your focus stays on business growth.
How can Simplicity benefit your recruitment business?
- Due Diligence on Clients: We conduct thorough due diligence and credit checks on your clients before you engage with them, reducing the likelihood of non-payment.
- Debt Insurance: Our Debt Insurance provides protection and minimises risk to your business when a client enters insolvency.
- Professional Collection Services: Our expert team handles overdue payments quickly and professionally, preserving client relationships while recovering your money.
- Legal Support: Should a client fail to pay, Simplicity’s dedicated legal team is available to handle the situation and pursue further action if necessary.
- Complete Recruitment Finance Solution: Simplicity’s collections services are part of a broader finance solution, whereby recruiters also benefit from invoice financing on both Temporary and Permanent Placements, payroll management, and FREE unique Recruitment Technology. You can grow your recruitment business with ease knowing that your cash flow stays steady and your workers are paid on time, regardless of client delays.
For more information regarding our Recruitment Finance Solutions, including our collections service, please call us on 01594 888518 or email sales@simplicityinbusiness.com.