How To Manage A Customer Refusing To Pay For Work Done In Australia?

How To Manage A Customer Refusing To Pay For Work Done In Australia?

If you have been in business for a long time, you would agree that sometimes you will encounter customers who either can’t or won’t pay their invoices. This can cause many disruptive flow-on issues for your business in terms of cash flow, time and resources. ¬†Instead of the money being in your cash flow it is sitting on your books as uncollected. Instead of concentrating on developing your business, your attention is focused on retrieving those unpaid invoices. And instead of employees working on getting their job done, their time is spent making follow up calls to clients who do not pay.

But before we get on the phone and vent our frustration at customers for not paying for the products or services you provided, it is worth considering the various reasons why the clients do not pay.

In our experience, some of the more common reasons why client’s do not pay outstanding invoices are:

1. Financial Difficulties:

Some customers may fully intend to pay your invoice but simply do not have the cash flow to do so. Often these financial difficulties are only temporary and can be addressed by contacting the customer and offering a short extension of time to pay or a payment arrangement. This can be particularly useful for customers who have a long history with your business as it allows you to recover payment without jeopardising your relationship. In order to avoid further issues down the loan, it is important that the terms of the extension or payment arrangement are clearly stated in writing so that the customer understands their obligations and the consequences of default.

2. Dissatisfied Customer:

Whilst every business does its best to keep its customers happy, there will, unfortunately, be occasions where a customer is unsatisfied with the services or products provided to them or the amount of the invoice and refuses to pay. In these circumstances, it is worthwhile contacting the customer to understand the basis of their concerns and see if there is any way to address these (i.e. through issuing a credit if appropriate).

Things to consider to minimise the risk of disputes:

    1. Before commencing services or providing products, provide a clear written quote for the estimated or agreed fee for the services/products and enter into a written agreement (ideally signed by both parties), which clearly sets out each parties’ obligations, the estimated or agreed fee for the services/products, and the terms of payment;
    2. For products, keep a record of the purchase order and delivery receipt signed by the customer;
    3. For services, provide regular progress reports to the customer and make sure your invoices provide an itemised description of the services provided;
    4. If the customer requests additional services/products make sure this is confirmed in writing;
    5. If the scope of the services/products changes or the fee increases (i.e. because of additional requests of the customer), advise the customer as soon as possible after becoming aware of this and get their written agreement to the same;

3. Invoice has not been received or has been overlooked:

Often the reason for non-payment can simply be that the customer is unaware of the invoice. For example, the customer may have recently moved addresses or your invoice may not have made it to the relevant person due to some administrative error. The customer may also have received your invoice but payment may have slipped their mind due to other concerns. In these circumstances, a reminder email or phone call may be all that it is needed to obtain payment.

Most businesses first step is to reach out to their customers and remind them about their unpaid invoice. However, in the event that the customer does not take your calls or respond to your correspondence or refuses to pay, despite all the follow ups you may consider seeking the assistance of a debt recovery lawyer.

Often a demand for payment on a lawyer’s letterhead is all that is needed to convince the customer to pay the debt. In addition to this a lawyer can act as an independent third party to assist in the resolution of a dispute over an unpaid invoice, where emotions can often be heated, and give you valuable legal advice on your legal rights so you know where you stand prior to incurring additional costs of pursuing the debt.

You may think that using a debt recovery lawyer to help you retrieve a debt can be expensive. But if you would think about it, it will save you time and money. Article about Five Reasons Why You Need a Debt Recovery Lawyer explains why its worth to use a lawyer from the start.