Top 3 Reasons Someone Could Be a No-Pay Customer and What to Do About It

Top 3 Reasons Someone Could Be a No-Pay Customer and What to Do About It

Material suppliers and large contractors don't want to deal with no-pay customers. Your company deserves payment for your goods and services. In this article, we delve into the main reasons customers could be slow to pay and what you can do to fix it.

The Top Three Reasons

1. Price Shock

In construction, you can run into snags that make the project pricier than first estimated. For example, natural disasters could cause delays in the supply chain, leading to a spike in the price of steel. The customer may be unwilling or unable to pay a higher rate than expected.

2. Invoice Confusion

Automated accounts payable systems may save time and money. However, if the project is coded incorrectly, it may send the wrong invoice or no invoice at all. When customers are confused about the payment, they may refuse to pay until your corporation provides a correct invoice.

3. Cash Flow Problems

You hope customers have budgeted adequately before signing the contract. However, some customers are unable to pay because they don’t have the cash. The inability to pay could be due to money mismanagement or unanticipated, external costs. Some customers would rather have trade credit than take out a bank loan.

How to Deal With a No-Pay Customer

1. Manage Customer Expectations

Be transparent with your pricing. Customers want to know what they are paying for; give them a breakdown of material and labor costs. Provide a written contract that is understood and agreed to by both parties. Get approval from the customer in writing before making any changes to the agreement.

2. Clear Communication

Communicate with customers before, during, and after the project. Sometimes a polite but firm telephone call is all it takes. Answer any questions your customer has about the invoice.

3. Legal Debt Collection

If talking with a slow-pay customer is going nowhere, you should consider placing them with an experienced bonded collection agency. The timely use of third-party collection intervention can be critical to the success of the collection.

Still Have a No-pay Customers?

Consider hiring a bonded collection agency. It would help if you had industry experts on your side when dealing with a no-pay customer. A collection partner can navigate through the construction debt jungle and guide you to the right steps before it’s too late.

If you’re struggling with no-pay customers, we can help you get paid with no collection fee: call 908-319-5155 or email cmdevito@kaighnco.com.