What to Do if a Customer Refuses to Pay – Debt Recovery Advice

16th May 2024

Have you recently provided goods or services and are wondering what to do if a customer refuses to pay?

When a customer doesn’t pay for works that have been completed, this can be a major headache for many businesses.

Small businesses especially cannot afford to let payment from customers go undisputed as this can affect cash flow.

In a report conducted by NatWest, it was reported that around 27% of UK SMEs admitted to being owed between £5,000 and £20,000 in unpaid invoices.

DCBL are the largest debt recovery provider in the UK, recovering hundreds of thousands of pounds for our clients every year.

Due to our expertise and experience, people know us as a trustworthy voice in the industry. To assist businesses when customers don’t pay, we have created this guide.

Customer Refusing to Pay for Work Done – What Should I Do?

There are many reasons why a customer may be unable to pay for work by your business.

Understanding the cause of why the customer won’t pay can help resolve the situation quickly and reduce any more stress to you.

Some of the most common reasons for payment delays include:

• Quality of the service provided wasn’t worth paying for.
• Financial difficulties meaning the customer cannot pay the amount owed.
• Payments aren’t made til the end of the month.
• The customer’s accounts system is down.

Sometimes, customers may show signs that they are not going to pay an invoice before you have even provided your services.

It is important to make note of anything unusual in their behaviour, such as deflecting any questions about payment during conversations.

Regardless of the reason for a non-paying client, you deserve to receive payment for the hard work you carry out.

Here are five tips to help prevent a customer refusing to pay for work done.

1. Preventing Future Non-payment

Firstly, mitigating the risk of future outstanding invoices is just as important as current customers refusing to pay.

After all, getting paid on time every time is the focus for every business in order for it to grow.

There are several things you can do to help to protect yourself and your business and ensure you receive payments on time.

Credit checking your customers before working with them, regularly sending payment reminders, and option for payment plans can help to reduce cash flow issues.

2. Implement Payment Terms

Another way to help prevent a customer refusing to pay is by implementing payment terms into your services terms and conditions.

Payment terms usually outline how much is to be paid, any payment schedules, and what date payment is due.

Clauses can be included that outline any consequences for the late payment such as late fees which will help to deter them from not paying you.

This will mean that you have something to fall back on should the customer make excuses for not knowing when to pay their bills etc.

Payment terms can be used as leverage during your negotiations with the customer, should you start escalating the situation.

3. Clear Communication with the Customer

When a client refuses to pay, we recommend that you reach out quickly to address their concerns.

They may be refusing to pay your invoice for something as simple as the address being wrong, which is an easy fix from your end.

Resolving the situation through amicable communication will help to alleviate stress from both yourselves and your customer.

Should they refuse to cooperate or deflect any questions relating to the reason for refusal to pay, you can escalate this further.

Just remember to document all communication when contacting the customer should you need them for future reference.

This can include anything from emails to payment demand letters to payment requests via SMS.

4. Discuss Giving the Customer More Time to Pay

Overdue payments happen from time to time and, as mentioned above, sometimes this is out of the customers hands.

Getting customers to pay what they owe may simply be a case of giving them more time to pay the outstanding debt.

Collecting payment through payment plans may also be a good way of ensuring the customer pays in a timely manner.

You may even improve your relationship with the customer as you are clearly taking into consideration their situation.

If a customer fails to pay after you have provided them with more time, you could charge late fees or investigate other avenues.

The most beneficial avenue to your business which will save time and money is by instructing a debt collector such as DCBL.

5. Instruct a Debt Collection Agency (DCBL)

Know what to do if a customer refuses to pay can be challenging if you aren’t familiar with effective methods to get the client to pay.

Using a debt collection agency is by far the most cost-effective way for your business when a client doesn’t pay.

Many business owners consider taking legal action against their customers to get an invoice paid.

Legal proceedings and the legal process can, in some cases, take quite a while and the legal fees can mount up.

DCBL provides a fixed-fee service that won’t waste your money – we’ll tell you if your bad debt is irrecoverable.

We work in conjunction with our sister-company, DCB Legal, to undertake any county court actions or court proceedings.

This allows our clients to instruct us at any point of the debt collecting process when chasing customers for payment.

Get in contact with our debt recovery specialists for FREE advice today.

FAQ – What to Do if a Customer Refuses to Pay

What steps should I take immediately after a customer refuses to pay?

Make sure you stay calm and professional if a customer refuses to pay for goods and services. You should politely ask the customer the reasons why they are disputing the payment.

Checking the terms and conditions of your transaction agreement to ensure all obligations have been met is a positive step forward.

Having a conversation with someone that is refusing to pay can help both parties and is known to provide a favourable outcome to the business who hasn’t been paid.

All communication with the customer should be documented, should you need to escalate this further.

How can I prevent misunderstandings about payment in the future?

Clear contracts are an essential part of making sure payments do not go unpaid in the future.

Make sure that the customer has understood and signed the contract prior to delivering goods or services.

You should outline payment terms and any consequences if they end up refusing to pay in the end.

How can I maintain a good relationship with a customer who has refused to pay?

Keeping lines of communication open with your customer to try and understand their perspective can help.

Willingness to negotiate payment terms with your customers will help to maintain your relationship.

They may have been struggling from financial difficulties, resulting in not being able to pay for the work carried out.

We also recommend that you maintain a professional tone when communicating with them.

How can I protect my business from non-paying customers in the future?

Conducting credit checks on your customers will help to know whether there may be a chance of non-payment.

Robust contracts with clear payment terms and conditions will also help to protect your business.

Using a specialist debt recovery such as DCBL is by far the best way to protect your business if a customer refuses to pay in future.