Besides not being paid at all, having a customer disputing your invoice is one of the most frustrating parts of collecting money.
All that time and effort you put into doing the job for them, being told that you will be paid and then they drop the D word on you. You both know the validity of their dispute is questionable at best, but they still won’t pay and they think that simply claiming the debt is in dispute suddenly buys them a way out. Luckily however, no money right now doesn’t necessarily mean no money at all. The customer thinks they are being smart by stalling, well guess what- you have tricks up your sleeve too.
We asked the founder of free debt collection app Paul Metcalf for some tips specifically for freelancers on what to do when they’re put in this situation.
Here’s his top 5 ways to deal with disputed debts:
1. Ask them to put their dispute in writing. This soon sorts the wheat from the chaff. If they genuinely believe they have been hard done by and shouldn’t have to pay the debt, or at least the whole amount, then they need to put in some effort to prove it. Tell them that in order to investigate their dispute, they need to outline exactly what it is that is preventing payment and why they are not happy. Simply telling you over the phone is not enough. Be very firm on this.
2. Ask for a part payment whilst you investigate. We are constantly shocked at how rarely people do this, however it works almost every time. Tell the customer that you are happy to investigate their dispute, however you need a goodwill payment first. 50% is a good place to start, otherwise go through the invoice in detail with them and find out which portions are not in dispute and get them paid. The benefits to doing this are immense- it gets you some money thus helping your cash flow, it resets the Statute Barred date (you are given 6 years to pursue a debt, which resets for another 6 years the moment a payment is made), the customer is now “invested” in repaying the debt which you can use to your advantage later, its shows a willingness on their part to do the right thing, etc.
3. Remind them of any previous promises to pay. If the customer is now disputing the same debt they only last week told you they would pay, then they are clearly playing games and you need to call them on it. Tell them the exact time and date they made the promise and ask them outright why they have suddenly changed their tune. When put under a bit of pressure, many customers just crack and pay.
4. Work with, rather than against your customer. Yes it is annoying. Yes it is frustrating. Yes you just want your money. But a little short term pain for long term gain should always be preferable. Investigate their dispute, empathize with what they are telling you and always try to see it from their point of view. Ask yourself would you pay, if you were in their shoes?
5. Be open to discounting the debt for a quick settlement. So their dispute is completely baseless and you tell them they need to pay, yet they are adamant they won’t because they still aren’t happy. What do you do? Suing them is an option, yes, as is sending it to a debt collector, but sometimes that just exasperates the situation and makes them even less likely to pay. Offer to discount the debt for a quick settlement and make sure you sell the benefits of them doing so- they avoid getting sued, they save some money, they can move on once and for all, etc. The amount you knock off is up to you, however think about how much a debt collector or legal action will cost you, and aim for less than that.
There you have it. With just a little bit of strategic thought and with the emotion taken out of it, disputed debts can be overcome and you can walk away with the money you deserve in your pocket.
For more, check out free debt collection app CollectMore.
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