Options to collect from customers who can't pay their balance in full

Suggesting a payment plan might help clients in need get back on their feet, and you receive full payment

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

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Question Dear Your Business Credit,
Help! I own a small moving business. A customer was getting evicted, and I sent three men to the job site. When the customer went to pay, the card was declined and he stated he would get it cleared up the next day. Well, that didn’t happen.

We recently sent the couple an updated bill, which included his storage and requested full payment of $2,300. The customer sent the card agreement form back asking me to charge $700.

I'm new to the credit card business and don’t want to lose the remaining balance by charging the amount they sent. Please help. No more good Samaritans. – Cherise

Answer Dear Cherise,
You sound like a good-hearted person, and I’m sorry that helping a couple in need ended up putting you at risk of not getting paid.

All the evidence in this situation suggests this couple is broke. Generally, people get evicted because they have not been paying their rent. Further evidence that they have little to no money is that you tried to run their credit card, and it was declined. That could suggest they maxed out the card.

Now the couple is asking you to charge less than the full amount owed on a credit card. That could be a sign they don’t have much credit left on that card.

Working out a payment plan
When trying to collect from clients who are in a bad situation, it helps to put yourself in their shoes. They are probably feeling a bit desperate. In this case, they just lost their home and now they have a moving bill they can’t afford to pay. They may not have any immediate source of income.

If you are able to work out arrangements that take their situation into account, I think you are much more likely to get paid.

I am assuming that at some point before the move, you had the couple sign a contract agreeing to what they owe and the terms under which they agreed to pay you. That agreement should give you some legal protection, if it was worded correctly, to pursue the debt if they don’t pay in the end.

As for your card agreement with them, it sounds like you are using one that gives you authorization to charge a customer’s card in full if an invoice goes unpaid.

Given that the customer doesn’t want to agree to that, I would suggest that you suggest a payment plan in which the customer authorizes you to charge the initial payment of $700 and then 16 monthly payments of $100 or eight monthly payments of $200.

If the customer agrees, word the document so that if they miss a payment because their card is declined or for some other reason, the balance becomes due immediately – and you can take action to collect on it.

I would suggest you have an attorney with experience in credit-related issues revise it for you, since you will still be owed $1,600 – a substantial amount of money for a small business. Ask for advice on what you are allowed to do in your state if the couple defaults.

Helping others while protecting your business
A compassionate approach can go a long way in a situation like this.

You might say, “It looks like you’re in a tight spot right now. I’m really glad we were able to help you when you needed to move out – I hope someone would help me in the same situation. Unfortunately, if you don’t pay me, it will make it very hard for me to pay my employees. I’d like to offer you a payment plan so you have a chance to get back on your feet and I can pay my bills, too.”

Yes, this means it will take a long time to get your money, but if this couple really doesn’t have any cash and their credit is depleted, there is a high risk you won’t be able to collect any money at all beyond the $700.

If they are honest people, they will appreciate that you gave them a chance to get caught up. Just make sure to keep good records in case their finances remain a mess or they are not honest, so you can pursue this further in small claims court if you it comes to that.

Good luck. In the future, I would recommend not moving forward on any projects unless you have received the required payment.

It’s commendable you are willing to help people in need, but if you truly can’t afford to take a chance on people who aren’t in a position to pay you, don’t do it. If you go out of business, you won’t be able to help anyone.

See related: How your business can get customers to pay upfront, What to do if you suspect card fraud by a customer

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Updated: 11-17-2017