My Customer Won’t Pay, What’s Next?

In the pandemic situation, a lot of customers have been struggling to meet invoice deadlines. In a covid-free world, unpaid invoices could be caused by a variety of factors, including delays in sending the invoice or human errors while processing payments. Nowadays, it is fair to assume that when a customer doesn’t pay on time, it means they are not in a position to make a payment. 

As the pandemic is affecting companies and draining the local economy, it becomes essential to reach out to your customers to find a viable solution. The global economic recovery depends on business cooperation to survive and thrive together. So how do you best handle unpaid invoices to support both your and their recovery? 

 

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You pass the invoice onto a factoring agency

A customer who doesn’t pay on time could be paying at a later date. A lot of companies have negotiated new payment terms under covid in an effort to reduce pressure on small businesses and clients. As a result, managing cash flow can be tricky without extra support. However, you can consider reaching out to a factoring company to keep your cash flow steady while customers pay at a later date. What happens if customers don’t pay their invoices at all? The no recourse factoring option can keep financial risks to a minimum for your business, which means that you don’t have to pay off the factoring company. Working with a factor gives you more stability to manage financial events and support your local economy. 

 

You try to settle the problem with legal assistance

Can there be another reason why your customer won’t pay the invoice? At a time where cash flow is precious, your customers are likely to be more strategic about what they are paying for. As a result, you might find that they are unwilling to pay the price for full services when the pandemic disrupted the delivery and production. Ultimately, if your business has not been able to meet their expectations during the COVID outbreak, it would be unfair to expect full payment. However, rather than letting the business dispute drain your processes and cash flow, you can reach out to legal professionals to litigate or arbitrate the issue. The approach can help to find a solution that satisfies both parties. 

 

You reach out to discuss new invoice payment’s terms

As mentioned above, payment terms may need to change and adapt to the new challenges. With limited cash flow and reduced profits, businesses can benefit from new payment terms. Allowing your customers to pay in installment, for instance, can make it easier to manage payments. While the process will affect your cash flow, the effect may be less dramatic if you can extend the installment terms to your own business expenses. This would avoid negative cash flow risks. 

Another helpful payment term update is to prolong the payment period. Invoices that would usually come with a 30 days term could double the payment period or extend it to 90 days. From a cash flow perspective, it makes day-to-day financial management tricky. However, in the long term, it could prevent more dramatic losses by allowing your customers to pay at their own pace. 

 

Can they pay you via other means?

Extreme times call for extreme measures. While this option isn’t suitable for most businesses, you can negotiate different means of payments in some cases. A customer with unique business skills could agree to pay off their debt by helping you with a project. However, it is fair to say that this type of agreement will need to be carefully contracted and monitored to guarantee a just and fair exchange. Your customer should not be delivering more value than what they would have paid you. While it isn’t always a practical approach, it is worth reaching out to customers to discuss whether they’d be interested in replacing monetary payment with a skill exchange. 

 

Can you wait it off?

New payment terms may not be sufficient for customers who have been furloughed, found themselves unemployed, or have been struggling to make ends meet during the pandemic. Therefore, invoices could be left unpaid until they can secure a new and reliable source of income. In the meantime, you can consider short-term capital funding solutions, such as loans and lines of credits, that can unlock cash flow in real-time. Tackling the cash flow emergency can give your customers more time to sort out their situations and pay the invoice at a later date. 

Amid a pandemic, it appears necessary for businesses and their customers to find solutions for their unpaid invoices. The post-pandemic economic recovery depends as much on businesses staying afloat as on customers maintaining their financial independence. Therefore, it can pay off in the long term to help each other and find temporary solutions to facilitate payments. 

 


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