What to do when customers do not pay their bills?

When customers do not settle their outstanding invoices on time, it means stress, administrative extra effort, and financial losses for the affected companies. Often, sending a payment reminder is sufficient, but in some cases, legal action may have to be initiated.

Timely receipt of payments is especially vital for small businesses. If invoices are not paid on time, it leads not only to stress but also to additional accounting effort. Therefore, it is worthwhile to prevent payment defaults through proactive planning. But what if all foresight has not helped and a customer still does not pay? – Here is how you can proceed.

Payment Reminder

Typically, invoices from Swiss companies include a payment period of 30 days. If a customer does not settle the outstanding claim after this period has expired, the first step should be to send a payment reminder. This is a polite form of reminder. The purpose of the payment reminder is to politely ask the customer to settle the invoice, after all, it is indeed possible that an invoice is simply forgotten. With an understanding payment reminder, the customer is not immediately offended, and a good relationship can be expected in the future. Although there are no formal requirements for the payment reminder, it is advisable to issue it in written form for proof purposes.

Reminders

If a customer still does not pay the outstanding claim despite the payment reminder, a 1st and 2nd reminder are usually sent. Unlike the payment reminder, reminders are generally more factual because they are meant to press the customer to pay the invoice. While the payment reminder can simply be a friendly letter, the reminder needs to list the outstanding claims, or a copy of the original invoice must be attached to the letter. The second reminder then includes a note on initiating legal action in case the customer does not settle the outstanding amount. In practice, entrepreneurs frequently demand so-called reminder fees in reminders. These are permissible (although not explicitly provided for by law) provided they are defined in the contract or the general terms and conditions. However, the principle of proportionality must be observed. A reminder fee of CHF 50 for an outstanding invoice of CHF 20 is not reasonable.

Legal Action

If an open invoice is still not paid after repeated requests, the risk of payment default arises. The entrepreneur still has the option to initiate legal action against the concerned customer at the competent court. Such a procedure can be extremely time-consuming. This is particularly the case if the customer defends against the legal action (legal objection). Those who want to avoid this effort can have the outstanding claim collected through a debt collection agency or assign it to them. However, this is also associated with a loss, so it pays to plan ahead.

Findea helps you to be able to overview the financial situation of your company at all times.