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5 Ways to Deal with Customers Who Do Not Pay

by | Jan 24, 2023 | Litigation & Dispute Resolution

Now that the economy has cooled, talk of layoffs is commonplace, and the word recession becomes a daily refrain payment patterns get upended and accounts receivable balloon.  With that in mind, it is good to have an idea of possible responses to customers who are late in making payments or who outright refuse to pay.

Of course the more your deal terms are memorialized in writing the easier it will be to collect on the monies owed.

Finally, it is important to recognize that there is a difference between getting a judgment in arbitration or litigation and actually receiving the money owed.  The reason is that arbitrators and judges generally do not get involved in anything beyond reaching a decision for one side.  As a result, everything else including payment is not the arbitrators or judges problem.

Here are some options to consider.

Cut a deal

One of the possible fastest ways to get some money is to cut a deal with the other side.  This typically takes the form of a percentage discount if payment is received in a short timeframe.  This the least formal way to resolve the matter.  If the other side accepts the offer and pays, then there is no collections issue.


If the relationship is still intact, then it could make sense to attempt to mediate the dispute.  The mediator will act as the go between the two sides in an attempt to bridge any differences.  While there are costs involved in hiring a mediator they are much less then arbitration or litigation.  Collection can still be a problem if the other side agrees to pay but does not actually pay.

Collection agency

If the relationship is destroyed or weak, then sending the problem to a collections agency is another option that moves the problem off your plate.  The downside is that you will have to pay the collection agency a portion of the dollars recovered.  On the other hand the collection aspect is now someone else’s problem.


If mediation fails or if the agreement requires it, then you can engage the services of an arbitrator to privately decide the issue.  Depending on the facts and circumstances, arbitration can be faster and cheaper than litigation while still provision the same finality of a binding decision.  Collection on the arbitration judgment is an issue that you will have to deal with after the victory.


Almost always the most expensive and lengthy option, litigation is an option if the amount in question is significant and all other efforts have failed.  Even if the dispute is in litigation roughly 90% of all disputes get settled before a trial is held.

The issue is always how long will it take to get to a settlement and how much time and money have to be spent in the meantime.  A signed settlement agreement reduces but does not the eliminate the collection issue in litigation.