Every business/company has at least once in its lifetime had an encounter with non-paying customers. Imagine making financial plans based on sales and actually selling your services/products but not getting paid at the right time. This creates financial crisis in cases where the sale was massive and was tied to certain expenses or financial obligations the business or company needs to fulfil. In other cases, the business owner or the company chews the bitter pill by writing it off as bad debt and vows never to be lenient when selling its products or services. The business or company owner, therefore, demands advance payment or increases its cost to accommodate the expenses associated with the provision of the services or sale of its goods and demands that this payment is made in advance. However, this type of decision can be only made in the wake of the aftermath of the bad experience. The customer on the other hand might not be too pleased to pay 100% for services that he/she/it is yet to receive or pay and might insist on paying a smaller percentage prior to the provision of the services. The potential conflict does not end there and might end up leading to the loss of a potential customer resultant from a lack of trust by the business/company.  The pertinent question that should be asked is :

How do I handle a non-paying customer?

Frequently asked questions such as this will be answered over a period of time and also in parts. How do I handle a non-paying customer is a question that requires some nuance and could have multiple answers depending on the context you are in, or the product or service that you offer.

Selling technique and the debt recovery problem  

Even though this is more of a question for legal and debt recovery processes, sales discipline can PREVENT you getting into these situations in the first place.   A professional salesperson avoids problems for himself, his or her employer, and the potential customer.   So let’s look into the all important question of how NOT to fall into this problem in the first place.  

Qualification 101 – Finding the right client  

“Qualification” is a key part of the sales process.   You probably haven’t heard of this term in this context before!   What is qualification?   And what does that have to do with the fact that Mrs Ogendengbe has refused to pay me my money?   Are they the sort of person who could cause me problems in the future?  

Qualification is the process of engaging a potential client in a conversation.   This is the “toasting” or “courtship” stage of the relationship where we’re trying to figure out who they are, whether your goals are aligned, and whether we have a business solution or personal solution for the client.   For lawyers this is what used to be called the “client consultation”.  

This is the part of the conversation where Mrs Ogendengbe would come into the office and complain for 1 hour about her neighbour who is trying to defraud her of XYZ.   At this stage she is not yet a client.   She hasn’t paid the Law Office, not even a kobo.   The lawyer’s job now is to figure out the kind of client Mrs Ogendengbe would be, and if her problem is the kind of one that the law office has the speciality and skills to resolve.   In sales we call this “qualification”.  Lawyers call this the “client consultation meeting”.   Some wedding planners call this the “pre consultation”.   And other professionals call this the “briefing”, “spec meeting”, “scope meeting” etc.   No matter what you call it, the important thing is, it should be a sacred part of the way you do business.  

So what are we qualifying anyway?

Part of the aim qualifying conversations is to figure out if the potential customer can afford the service in the first place!   The goal is also to see if there’s a need worth spending money on.   This second question is about figuring out if the client thinks this is a big enough problem to throw money at.   So with the lawyer scenario, we should be asking Mrs Ogendengbe questions to see if she can afford our 1M asking price.   We should also be asking questions so that she realizes that apart from the initial 1M, there could be later charges in appearance fees to the tune of 150K per court sitting… and also we might expect the court action to last about 3 years.   If we ask the right questions and figure out that resolving this dispute could gain her 10M at the end of the three years, then she might be convinced that this is a good idea to go ahead.   However, if during the meeting you can’t get any sense of a reliable income source from which she can fund the litigation, you should have your concerns.   If she seems incredibly wealthy but cantankerous and spiteful, it might raise your concerns about whether she will live up to her end of the agreement or not.   These and more are the many variables one has to consider before entering into a relationship with a potential client.  

Why is all this important?   T

The more time you spend with properly “qualified” buyers, the less time you might spend in debt recovery or any other problems in the future!   Sometimes the problem is the client either 1. Couldn’t afford you in the first place, or 2. Didn’t think their problem was worth “sinking” money into.   Sometimes the client has run into some bad luck and the reason why they aren’t paying you is not in bad faith.  They simply have fallen on bad times!  This article is not concerned with the latter.   That’s the subject for another discussion.  

Qualification and setting expectations  

While having these key conversations before engaging the client, you should also be establishing clarity of expectations.   These expectations should include not just how much ought to be paid, but also the mode in which payments will be staggered, or performance criteria along which payment will be assessed.   So it is not enough to tell Mrs Ogendengbe that it is 350K to design her website.   She also should be told that the initial deposit of 200K is to happen before you begin any coding on the website at all!   She should also be made to understand that another 100K will be paid once you build in her store front and payment applications, and then the final balance of 50K will be after she receives the first 5 orders through the platform and you’re sure that everything works as you promised.   If her response to any of these questions is “o ti o!”, “let me think about it”, “do you want to build house on top my head?”, or “let’s be going forward and see” …then please hit PAUSE.   Expectation haven’t been properly set.   There WILL be quarrel in the future. It is not a matter of WHETHER, but WHEN the quarrel will come and what the size of the brouhaha will be.  

Qualification, setting expectations and contracting terms  

Once you have gone through the qualification process and figured out that Mrs Ogendengbe is a good candidate for a business marriage, and you are sure that expectations have been properly set… the next stage for the average Nigerian is the contract!   Do you absolutely need a contract?   Some subjects are governed by statute and absolutely require contracts and paperwork in specific forms.   One of these is for the sale of land.   Don’t handle land transaction for the client on the recognition that Mrs Ogendengbe is an elder in your church.   You need more protection than that.   Beyond these statutory matters, for most people any kind of memo will do.   The court will listen to you even if you don’t have a signed contract, but you have some paperwork, receipts, witnesses, and emails to show that you both intended to enter a business marriage, and what terms you intended to do that under.   The court will treat this as an “intention to create legal relations” so don’t worry if Mrs Ogendengbe didn’t sign a contract for the supply of 200 crates of eggs that you sent to her shop last week.   Did you guys send WhatsApp messages and emails?   Did you send her an invoice that her store manager acknowledged receipt on?   Don’t worry, you have a leg to stand on.  

Fleshing out contracting and agreement terms  

What should be regarded as the terms of contract that you guys write down?   The answer is straightforward!   It should be the payment expectations and execution terms that you guys agreed to in the “qualification” stage.   Stop using templates.   Leave that to your lawyer.   You also don’t need to write in legalese.   If you use ordinary language the courts will still listen to you.   When all these are written as part of the contracting terms, if you have to go through debt recovery through the courts, things will be easier to determine.  

What’s the bottom line?  

Eventually you have to ask yourself if it’s worth the hassle to involve lawyers and the courts to collect money on 200 crates of eggs.   Or should you bother about the 350K for the website?   How about the 1M for the legal processes you initiated?   The answer differs on a case by case basis.  

Can you make it someone else’s problems?  

Surprisingly there is an industry in Nigeria and world wide called “factoring”.   These people (called Factors) like to buy other people’s “gbese” (legal liabilities and accounts receivable – basically any money that people owe you).   They buy it from you at a discount and then go along to sort out debt recovery by themselves.   How does this work?   If your 200 crates of eggs that you sold to Mrs Ogendengbe is worth 500K, the factor might offer you 150K cash.   If your spouse says “at least let us see something from this… and may wicked clients like Mrs Ogendengbe never come our way in Jesus’ name!” Then maybe you take the money!   The factor will take all your paperwork and pursue Mrs Ogendengbe either through the courts, or maybe they will pay MOPOL to go and lock up her shop.   If they are able to spend 50K on recovery, then they will keep the balance of 300K for themselves.   Who are these people and how can you find them? I have no idea!   But I know that while I was in LAG, a PR firm I know of used factors to recover some of their costs this way.  

The way forward?  

Business is more than just branding and packaging.   Learn how to sell.   Learning how to sell involves learning how to “qualify” someone properly.   The more you qualify someone, the less quarrels you have in the future.   Even if you have a quarrel, the better prepared you will be.   And may God help us that wicked clients will not come our way in Jesus’ name!    

ABOUT THE AUTHOR

Tavershima G. Ayede is a Sales Consultant who helps business people improve their sales using simple conversational techniques, and career people to be more effective at work and networking. Listen to his podcast using this link https://anchor.fm/s/162b3f48/podcast/rss and subscribe to his daily blog at https://tavershima.blogspot.com/