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How could my business avoid issues with nonpaying clients?

On Behalf of | Dec 29, 2021 | Business Litigation |

Before your business accepts a project, you may request that a client signs an agreement reducing your risk of nonpayment. The U.S. Chamber of Commerce notes that a lack of repercussions causes some clients to miss making their payments.

Customers may experience financial issues that prevent them from paying on time. Other clients may consider your invoice a lower priority than bills such as rent or utilities. Unpaid invoices, however, could cause your business to run into cash flow problems.

How may a service agreement prevent outstanding invoices?

To help avoid problems involving late payments, you could discuss a project’s costs with a potential client. By creating a service contract based on your costs, you could outline your work schedule and the project’s completion stages.

Your work or project contract may include your billing procedures and the penalties for late or missed payments. The terms and conditions could also describe how your business collects on outstanding balances. With a contractual agreement, a client generally provides consent to pay late fees when applicable. Your contract may also describe payment options that offer clients payment scheduling convenience.

How may I recover unpaid fees?

Your contract may include terms that outline when you could refuse a client’s request for additional services. Clients with temporary cash flow problems may ask to move a payment date or break down an invoice into smaller bills. If you wish to retain them as customers, you may consider negotiating payments or adding late fees.

As noted by Business News Daily, a client who ignores your invoices may require firm requests for payment. Demand letters or collection notices may help to retrieve unpaid amounts. A well-written letter or convincing communication may encourage a client to resolve an unpaid balance rather than face a legal action.