What to do when your big company client won't pay your bill

Your relationship with your large business client shouldn't be a David-vs.-Goliath situation. But realistically, it often is. Large companies don't care about your cashflow.

We need to start off this article by managing expectations right off the bat: What we're about to say is most likely not what you want to hear. But it's offered in the hope that it helps your business operations and cashflow, in the long run. We also want to say that all businesses struggle with this problem - even we have, in the past, before we made a purposeful move towards only dealing with certain clients. We've been there too, and we speak from painful experience. We hope the information below helps your company to stop tolerating bad behaviour from bad clients.

You land the big, exciting deal.

You've signed a deal with a big corporate client, for example, one of the retailers. You've jumped through all their hoops - KYC, DEI, ECG, Procurement, FICA, BEE, reference letters from past clients, Confirmation of Good Standing with the applicable governing body, Ethics Declarations, Sureties, and a Supplier Contract which was so prejudicial against you that there seemed not to be a point in even reading it.

You sourced and supplied goods to them at your own cost, taking on debt along the way. The contract already provided for payment only after 90 days, and only upon you complying with a laundry list of contractual terms regarding approval of your company's invoices.

Then, to add insult to injury, your client still fails to pay you after 90 days. You enquire politely with the Finance Department, but the grumpy aunty in Accounts isn't interested in your plight. You'll get paid when you get paid.

All the stress is on you. All the risk is on you and your family. Your business is facing failure. What should you do? How do you get a client to pay their outstanding bill, especially a client much bigger than you?

There's no perfect answer.

We won't pretend to have all the answers: there is often no way to maintain a good working relationship with a client failing to honour its obligations. But after seeing this pattern with almost every client we meet, one clear pattern emerges:

Your client is not paying you.

Your client is the one who breached the contract.

You are not the one damaging the relationship by taking your client to task.

It is your client who is damaging the relationship by not paying you on time.

So, what options do you have? It would be great if there were a South African equivalent of the Better Business Bureau, or some form of small business union - and maybe it's time for businesses to come together to create that body - but at the moment, there isn't.

So here we've ranked your options in increasing order of severity. Again, understand that it is your client who damaged the relationship, and ask yourself - what would your client do if the roles were reversed, and you had failed to pay them? You can bet they'd take legal action without a second thought for your feelings or the business relationship.

Ask yourself: "what would my big client do if the roles were reversed - and I owed them money?" You know they'd take action without a moment's thought for your feelings.

0: Set up the right terms in the first place.

This step is purposefully numbered zero, since if you're reading this, it's too late to negotiate contract terms. But it's essential to have agreed to terms which were favourable enough to you in the first place, before you started doing business with this problem client. We know it's difficult (nigh impossible) to get some bigger clients to agree to your terms, but if that's the case, then our best advice is to rather work with companies closer to you in size and leverage, where you can come to an agreement that is reasonably favourable to you. Prevention is better than cure. In many industries, there are thousands of potential clients at a size similar to your business - consider dealing with these clients if a bigger client won't contract with you on reasonable terms.

PART A: "GENTLE" ACTIONS WHICH MAY STILL PRESERVE THE CLIENT RELATIONSHIP

1. Send the client a polite Notice of Breach.

Most professionally drafted Supplier / Service Agreements should contain a standard breach clause, which provides that in the event of breach by a party, the other party must first send a Notice of Breach, affording the breaching party seven days to rectify the breach. This is an essential aspect of contract management - and if you don't do this step, you often cannot take legal action until you have first sent this letter.

The Notice of Breach doesn't have to take the form of an aggressive lawyer's letter. It should be a simple, polite but firm notice to your client that they have breached the terms of the agreement, and a gentle but fair warning that you will hold them to the terms of your agreement. Remember - your big retailer client would do this to you without hesitation.

2. Suspend the supply of goods / services.

We know this is a difficult step to take, and we hear you cry: "that's unrealistic!" Additionally, your contract may be drafted in such a way that it prevents you from doing so - so scrutinise the contract carefully before you take this step. But if you're getting abused by your client, and if you have a contractual way out - cut your losses and look for work elsewhere. Depending on your industry, suspending services can often be a highly effective way of ensuring payment - and if your client hasn't paid, you're not the bad guy for doing it.

3. Have your attorneys send a warning letter to the client.

Again, this letter doesn't have to be aggressive. We often send letters to our clients' debtors with a gentle warning - "we're here, we look after our client and we note that you have not made payment in terms of the agreement. Please rectify the situation urgently, or let our client know if there is some problem with the goods supplied / service rendered - otherwise we will have no choice but to take further action." Your client will be far less likely to mess you around knowing that your attorneys are actively monitoring the situation.

4. Start charging interest.

If your contract provides for a painful interest rate for clients in arrears, you probably haven't started charging interest yet. Start now. Send the client a notice that, not only is their account in arrears, but that you will commence levying interest on their account, followed by handing them over for collections.

PART B: STRICTER ACTIONS WHICH WILL LIKELY END THE CLIENT RELATIONSHIP

5. Report the client to some form of governing body, franchise owner or statutory council / ombud.

If the client is part of some industry governing body, you may consider reporting its non-payment to the industry governing body. If it is part of a franchise, you could bring the matter to the attention of the franchise owner. Alternatively, you could consider filing a complaint with the National Consumer Commission.

Note: whether your business counts as a "consumer" under the Consumer Protection Act (and therefore has access to the NCC) depends on several factors including your business' annual turnover.

Also, as of February 2025, the Small Business Ombud has just been established. Qualifying small businesses may presumably lodge a complaint there. It remains to be seen, however, how effective this Ombud will be.

6. Terminate the contract.

If, after polite requests and a Notice of Breach, your client still hasn't made payment, consider terminating the contract. The relationship is already over, and you're not getting business from that client again. Now you need to proceed to legal action to get back the money you're owed.

7. Commence legal action.

If your client has ignored your attempts at amicable settlement, there is in our experience very little chance that the matter will be resolved without "legal pressure". That pressure comes in the form of a Letter of Demand from an Attorney, followed by summons, followed by whatever further steps are necessary to collect the debt owed to you. We advise clients not to tolerate any debt in excess of 90 days in arrears. Past this point, there is (1) no excuse for your client not to have settled your bill, and (2) an increased chance that you end up with a hollow judgment - why? If a client is not paying your bills, and if it's not due to your own poor performance, then you can bet that client is dealing with cashflow problems. You can also bet that client is failing to pay some other bills as well - and that client may be heading for Business Rescue or Liquidation.

When considering legal action, one always conduct due diligence first. We seldom advise clients to proceed with legal action where (a) their claim is flawed, or (b) the legal costs are likely to be close to the capital amount claimed.

8. "Blacklist" the client.

If a client has defaulted on payment due to you, you may be entitled to "blacklist" them (an informal term for the process of lodging an adverse credit report against their credit score). Check with us first before you do so - not all disputes entitle you to list a default, and if you do list your client without sufficient grounds, you could face a damages claim.

Our recommendation?

Of course, as attorneys, we recommend litigation if your case is sound. But there's good reason for it. Debt collection is all about pressure, and it's essential to show your client that you mean business. Also, bear in mind that waiting too long to commence legal action on a debt may cause it to prescribe (extinguish) under the Prescription Act. For assistance in defending your rights against bad clients, contact us here.

The above information is for illustrative purposes only and does not take into account your specific circumstances. It therefore does not constitute legal advice. Please contact us for comprehensive advice to address your circumstances. Under no circumstances should any person use the above information in an attempt to circumvent the provisions of legislation or contract, or to cause damage to any other person. Always ensure you and your company are in compliance with the law in all dealings.

This information is accurate as of the date of publication.

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