You received an order from a new client, produced the requested product, sent the product off to them, and then waited patiently for the money to roll in. But, it never did! Or it did, but wasn’t the full amount. Or it did, but you realized that you charged too little by accident. What do you do?
Receipt Versus Invoice
A little reminder to start off with…a lot of people confuse the terms ‘receipt’ and ‘invoice’, so let’s make that distinction. Basically an invoice is a bill, or a request that the client pays for the good or service, and a receipt is documentation that the good or service has been paid for.
Non-Payment or Under-Payment
There are a variety of ways to handle a non-payment or under-payment. You can start with an easy option and escalate your response based on the client’s actions…or rather, inaction. Some options include:
- Reach out to the Client: For some clients all you need to do is send a reminder that the invoice is still unpaid. People get busy, forget, and misread. The non-payment or under-payment may be a simple mistake. If it wasn’t a mistake and the client can no longer afford the good or service, consider allowing a return or payment plan in order to avoid a collection scenario that may never result in your receiving payment.
- Reach out to the Client AGAIN: Reaching out once may not be enough to remediate the situation. Your contact with the client should always be professional, polite, and clear about the expectations of your agreement. However, if the client is ignoring your contact, you may need to begin using firmer. Think “cease and desist”-esque language. For example, “If I do not receive payment by March 1, 2016 I will be forced to begin collections actions.”
- Collection Agency: Turning the debt over to a collection agency may take the burden off of you in terms of handling the situation, but they also take a large percentage of any debt collected. Collection agencies are not full proof and they may not obtain full or any payment from the client. You will have to weigh and balance whether this option will work for you in your circumstances.
- Legal Action: Legal action can include utilizing a mediator or hiring an attorney to bring the case to court. A mediator can be a cost efficient way to come to a compromise in certain situations, but not all situations will lend themselves to this method. For example, if your client has ignored you they will probably ignore a mediator reaching out as well. You may need to utilize an attorney to take the client to court in order to finally receive payment. When taking this action you will need to consider whether the cost of going to court is worth payment of the debt.
Remember the importance of determining how much of your time, effort, and money is worth you putting into the situation. A small debt may not be worth attempting to collect at all.
Errors on Invoices
Mistakes happen. What if you make a mistake on your invoice?
- Mistake on Invoice Noticed Before Payment: In the instance that you notice a mistake on your invoice before the client has paid, quickly email or call the client and notify them of the mistake. If payment hasn’t been made at all then you can issue a new, corrected invoice.
- Mistake on Invoice Noticed After Payment: In this instance, you will need to contact the client and notify them of the issue. In the case of an over-payment you will need to issue a refund or credit on a future payment/purchase. In the case of an under-payment you will need to issue a second invoice for the remainder. This might not make clients happy, but a once-in-a-blue-moon mistake is generally not an issue. If it happens repeatedly consider customer service solutions, such as a discount to remediate any inconvenience you have caused for the client.
What Can You Do To Avoid These Issues
There are a lot of ways to avoid under-payment or non-payment and the issues that comes with them in the future. Some examples include:
- Contracts: A solid contract can set the expectations for all parties in advance. Laying out specifics of what the client will receive and when, when and how payment is due, specifics of how much is due, and what will happen if payment is missed can set everyone up for success. It can also benefit you if you end up in a legal situation later.
- Send Reminders: Send polite reminders just before payment is due. Do the same if a payment is missed. People lead busy lives and a quick reminder may be the difference between timely payment and the extra work of a non-payment situation.
- Keep Excellent Records: In all situations keep all your records and try to do things in writing. This way if you ever end up in an under-payment or non-payment situation you have the evidence to back up your side of the story.
- Shipping: Do not send the good or provide the service until payment, or at least a deposit, has been made. This way you won’t be in a complete loss if you aren’t paid. Remember, to discuss this in your contract or terms of agreement/service.
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