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Dealing With Slow-Paying Customers

0 Comments | Aug 20, 2012 | Written by:

Try These 5 Tips and Start Getting Paid

please pay signThere eventually comes a time in every business owner’s lifetime when they are faced with a customer who drags out paying their invoices. And in times of economic uncertainty, these scenarios can become more and more commonplace.

While at first you may be tempted to just wait for the customer to pay, that course of action causes two detrimental results – the delay will eventually start impacting your business’s working revenue, and you will essentially be giving that customer the freedom to believe that he can pay you whenever he feels like it.

This problem can often leave small business owners confused and frustrated. On one hand, they do not want to take on the cost of hiring a lawyer to try and collect the money, yet they cannot let the customer continue to go on paying slowly (or not at all).

If you are in this position, try these five tips to getting your payment disputes resolved.

#1 – Offer a Repayment Plan

You can offer the slow-paying customer the chance to spread out their debt over several, more affordable payments without interest (if you choose). Before accepting the offer, however you should have the customer sign a promissory note with a security agreement.

This will give you the legal right to be able to place a lien on the customer’s assets, if the customer chooses to file for bankruptcy.

#2 – Offer a One-Time Reduction of the Debt

Offer the customer a limited-time debt reduction by whatever percentage you can realistically afford.

Set a deadline date by when the deal has to be accepted, and the manner in which it should be accepted (via calling, emailing, or mailing in a form). Explain to the customer very clearly that this is a one-time offer, and after the deadline date passes, the debt will be due in full.

#3 – Offer a Principal Forgiveness Incentive

Offer the slow-paying customer the chance to reduce their debt further every time they make a payment on the principal of the debt.

For example, if the customer agrees to make a large payment against the principal, then you agree to reduce their principal by an additional percentage. Put this plan into writing, so the customer knows how much they can save on their debt (based on how much principal they pay).

#4 – Offer Several Repayment Options in a Demand Letter From a Lawyer

Sometimes a business owner has no option but to hire a lawyer to help them collect a debt, if for any other reason than the fact that collection letters with attorney letterheads get far more attention than non-attorney collection letters.

In your first demand letter, offer the slow-paying customer a number of suitable repayment options to choose from, ranging from a reduced amount when paid in full, to lower monthly payments that will result in the debt being paid in full.

#5 – Send a Demand Letter Threatening Legal Action

If the previous, “friendlier” collection tactics have not resulted in the customer paying their debt, then you may be left with no other option than to threaten them with legal action.

This demand letter should again come from your attorney’s office, and should state in no uncertain terms that legal proceedings will be started if the customer does not pay the debt by a certain date.

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Dave Donovan is a freelance writer and owner of Donovan Copywriting. He has more than seven years of experience as a professional writer, editor, and proofreader. Dave has written extensively for the web with a primary focus on articles targeting finance and business.

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