As a business, it’s important that you get paid what you’re owed by your customers and your clients. Late payments, and people trying to avoid paying for goods and services, can be costly to your business and have long-lasting and damaging repercussions.
What should I do when a client doesn't pay?
Invoice as normal
The process for debt recovery should begin with you invoicing your clients as normal. You and your clients should have already agreed on payment terms, so, ideally, at this point, you should wait for confirmation that you’ve received payment.
Read our guide on how to write an invoice to make sure your invoices contain all the relevant information to speed up the payment process. FSB members can download a debt recovery guide from FSB Legal Hub.
It’s common for invoices to have a payment term of 30 days stipulated at the bottom. If it turns out that you haven’t been paid by a client when you were expecting, then you should begin the process of chasing up the invoice. Send additional emails or make phone calls to politely remind the client that they need to pay for the work you’ve completed for them, otherwise the situation will continue to escalate.
One way to prompt a client to pay is to stop doing any work for them until they have paid their outstanding debt to you. This is sometimes referred to as a credit hold or administrative hold, whereby work on an account stops due to a lack of funding.
In many cases, this is likely to solve the problem as a business might suffer without the services you are providing to them. However, if this doesn’t result in you receiving your payment then you do have other options.
The final notice is the last piece of correspondence you’re likely to send the client before legal proceedings begin. This highlights to them that they have until a certain deadline, which you can decide, to settle any debts with you, before you begin pursuing legal action against them to claim the money you’re owed. FSB members can download a template letter before action from FSB Legal Hub.
If this final notice doesn’t see your client settle any outstanding payments with your business, then you have different options to pursue when considering legal action.
Your last resort is to pursue legal action against your client. When this happens, you have two options open to you, depending on the amount your business is owed:
1. Small claims court
The small claims court will allow both sides (you and your client) to mediate and reach a conclusion. This will usually mean the client is ordered to repay any debt, interest and fees, which have been accrued as a result of having to pursue legal action.
2. Debt collection
The other legal option is to enlist the help of debt collection specialists such as FSB Debt Recovery, a dedicated services for FSB members. You can access fixed fees for sending a solicitors’ letter to the debtor, issuing proceedings for non-payment and taking enforcement action to recover under a judgment. You also have access to the tools, advice, guidance and materials needed to take these steps yourself should you wish to do so.
Take back control of your cash flow
It’s time to get the money you’re owed thanks to FSB Debt Recovery. Step-by-step guidance on chasing late payments, 24/7 support, free DIY template letters and clear, discounted legal costs.