You’ve worked HARD to build your business. You’ve created freebies, you’ve done collabs and podcast interviews galore, you’ve offered discounts, you’ve hustled, and you’ve asked for the sale more times than you can count. And now you’ve got clients and you’re off the ground and running. It’s an incredible feeling to finally be reaping the rewards from all that you’ve sown … and then a client misses a payment or two or three. What the hell, right?

No matter how far along you are in business, this scenario is the pits. It’s NOT an incredible feeling when one of your hard-won clients doesn’t pay you. You’re left wondering, is it me? Is it my product/service? What do I do now? Can I salvage this relationship? How do I get my money?

Non-payment is something that is going to come up in business. It’s awkward, but it doesn’t have to slow you down. Here are some tips for dealing with clients when they don’t pay on their payment plans. Follow these steps to regain some control of a situation that can feel beyond your control.

6 Steps to Take When Clients Stop Paying

1 - Separate business from personal

The very first thing you need to do when a client misses a payment is to take a breath and remind yourself that this is probably not personal. Chances are, the failed payment(s) don’t reflect the client’s view of you and/or your business, product, or service. It’s likely that something else is to blame, like financial challenges or unforeseen circumstances. It could even be as simple as someone forgetting to make a payment, if it is manually made, or having some issue with their automatic payment method, like an expired credit card. No matter what the reason, it’s important to not take it personally and to approach the situation with professionalism.

2 - Stop and evaluate

Before jumping to conclusions or writing any angry emails you may regret later, take a moment to evaluate the situation. Consider asking yourself the following questions to help you get a sense of how significant or insignificant the offense really is:

➡️How late is the payment?

➡️How much is the outstanding amount?

➡️Is this a first-time offense or a chronic issue?

➡️Has the person communicated with you at all since the missed payment?

➡️What does your contract say?

When you ask yourself these questions, you’re forcing yourself to think rationally instead of reacting emotionally—at least that’s the goal.

3 - Let your contract be your guide

THIS moment right here, fam, is why you have.a.contract. Thankfully, you did not cut corners; you used a lawyer-drafted contract when you signed this client and it has terms for just such an occasion as this. Now, it’s time to review your contract terms for non-payment. What does it state about payment schedules, late fees, and methods for resolving disputes? Let your contract be your guide for making your next move.

Side note: If this is your first nonpayment, consider how you might improve your contract going forward as you work through this situation, or even schedule a call with me to discuss your options + how we can improve your contract.

4 - Seek peaceful resolution through communication

Start cool and escalate from there, if necessary. If you come out of the gate hot and aggressive, it’s hard to de-escalate the situation. Effective communication can often resolve payment issues. If there’s a misunderstanding, a respectful and professional conversation with your client is the best way to sort things out so she does not feel the need to get defensive.

We recommend:

➡️Reaching out in writing. You’ll really want to have your communication in writing, because then it can be referenced by all parties at any time. Outline the overdue payment(s), reiterate the contract terms, and suggest a solution. Do this firmly but politely.

➡️Offering flexibility. It’s a good idea, if at all possible, to propose alternative payment arrangements and/or offer an extended deadline. This shows that you’re willing to meet the client halfway and that you’re sensitive to whatever situation she finds herself in.

➡️Keeping records of your correspondence. Don’t delete your email thread or throw away letters. If your client responds to your communication, keep those responses on record in case you need them later.

5 - Consider further action

If polite but firm communication gets you nowhere, you can consider taking your efforts up a notch. One option would be sending a formal demand letter that’s drafted by you or a lawyer. The demand letter shows the client that you mean business and that it’s time for her to prioritize getting paid up. This letter may also include the fact that you’re willing to take legal action. Further legal action could also involve a suit, like maybe taking them to small claims court, or pursuing the overdue balance through a collection agency.

6 - Evaluate the cost vs. benefit of pursuing missed payments

Before taking legal action against a client for the money she owes you, consider the time investment involved, the cost of hiring a lawyer to pursue this for you, and the stress the situation might place on you. Weigh all of this against the amount owed. If the amount owed is still big enough to warrant taking further action, then go for it. If it’s not, it may be the better move to cut your losses and glean what lessons you can from the situation for the future.

Lesson Learned: 4 Ways to Minimize the Impact for the Future

Use payment language that authorizes the entire amount of the purchase, regardless of whether or not there is a payment-plan option. You can also have the authorization to charge their card for future payments (in a payment plan) if they don’t make scheduled automatic payments.
Include a clear chargeback policy so in the event they do request a chargeback through their card or bank, when you provide the contract as evidence, it has this clause there to support your case.
Don’t use payment plans that extend beyond the length of the program. For example, if you offer a program, launch earlier so the first payment is before the start date and the last payment is still during the program. If you have a course, drip-release content in line with payments. If you provide services, take a deposit and then start, or take a deposit for a future start date so all payments can be made before the project is completed.
Include the right to pause or revoke access to the product/service if payments aren’t timely made. This is necessary so that YOU are not on the hook for breaching the contract by stopping services or not meeting future deadlines because of non-payment.

Finally, always, always, always use lawyer-drafted contracts for clients, because you never know when a tricky situation will arise. When it does, you’ll be really glad to have clear-cut contract terms on your side.

Need lawyer-drafted contracts for your biz? We’ve got all the templates you could possibly need.