Small businesses sometimes struggle to get paid by customers and clients, which can quickly lead to financial hardship. Unlike big businesses that can easily absorb a few unpaid contracts, small and locally-owned businesses may struggle to make ends meet when someone doesn’t pay an invoice.
After all, they still have to pay the staff that provided the service or pay for the goods that the customer received. Of course, your reputation is also critical as a small business, so you may worry that trying to get what a customer owes you could damage the way that your community views your business.
What options do you have when someone won’t pay your company?
Do you have a contract with this customer or client?
The first and most important thing that you can do to protect your company from non-payment by someone who is already received goods or services is to require a contract before any exchange occurs. That way, you have written proof that they agreed to pay you a certain amount.
Your contract could also include terms such as late payment penalties that might help you incentivize someone to pay when they have not done so already. Sometimes, sending a letter that references the contract is all that you need to do to get a check. Other times, you may need to take additional steps to protect your company.
You can go to court over an unpaid contract or transaction
Civil court isn’t just for people who need to seek compensation for an injury or big businesses. It is also an excellent resource for small businesses. A judge can review your contract or other documentation showing that you provided something to your customer or client and received nothing in return.
They can then potentially rule in your favor and order the other party to pay you. In some cases, they may grant you a lien against their property or otherwise put you in a position that will make it easier to compel your non-paying client or customer to fulfill their financial obligations to you.
Sometimes, simply getting served with paperwork for a court date will be enough to motivate payment. Other times, you will need to be ready to have someone advocate on your behalf in court to get what you are owed. Taking action early will not only limit the impact of unpaid invoices on your business but will also set an important precedent for others who might try to similarly defraud you by refusing to pay in the future.