Services not performed: How to protect your business when vendors don’t deliver

Picture this: You’ve just paid a contractor to upgrade your store’s lighting system. Weeks go by, and all you have to show for your money is a string of excuses and unreturned calls.

If this sounds familiar, you’re not alone. Every year, thousands of business owners pay for work that never gets done or gets done only halfway. The problem goes by many names: “services not performed,” “phantom services,” “service nonperformance” or just plain “billing fraud.” Whatever you call it, a 2024 Creditsafe study suggests it’s one of the most widespread business scams.

The numbers tell a sobering story: More than half of U.S. businesses lose over 30% of their money to vendor scams each year. Even more alarming? It happens a lot. More than 40% of businesses faced seven or more scam incidents in 2024, with the two biggest culprits being fake vendors and bills for work that was never done.

These aren’t just statistics — they’re real problems that can derail your business. Here’s what that looks like on the ground.

Scam vs. fraud: Know the difference

One of the most important things to understand when you think something’s gone wrong is whether you’re dealing with fraud or a scam — because that determines what protections you may have.

• Fraud means an unauthorized transaction — like if someone hacks into your account or steals your card and makes a charge you didn’t approve. That’s fraud, and it’s often covered by stronger protections.
• Scam means you authorized the payment — but the vendor didn’t hold up their end of the deal. Maybe they lied about who they were or never delivered the service. That’s a scam, and while it can be harder to recover the money, there are still steps you can take.

Both are bad news. But understanding the difference can help you move faster, and it can make all the difference when it comes to disputing charges or filing a report.

Red flags and warning signs for vendor scams

Reputable vendors want you to know they’re reliable and professional. They’re proud of their work, clear about their terms and happy to put everything in writing.

When they don’t? That’s when you need to pay attention to things like:

• Limited proof of experience. Legitimate vendors will offer verified business credentials, with customer reviews and references you can actually call. Be cautious if you hear a sales pitch instead of proof of actual work.
• Demand for full payment up front. A deposit makes sense, but asking for all the money before work starts puts your business at risk.
• Changing payment methods. Be cautious whenever a vendor asks you to update where you’re sending your payments via email or text. Call the business to confirm that it’s really the vendor who is asking for the change — and not a bad actor who’s hacked their account.
• Vague details. Watch out for fuzzy promises without specific deliverables and timelines. Reliable vendors tell you exactly what they’ll do and when they’ll do it.
• Prices far lower than market rates. When someone’s charging much less than everyone else, that may signal quality or delivery issues.
• No verifiable business presence. Do your research to make sure the vendor is legitimate. Can’t find reviews online? No referrals or office address? Those are more red flags.
• Inability to meet in person. Many business scams involve businesses paying vendors they’ve never met — and many scammers aren’t even in the U.S. Meet with vendors in person whenever possible for added verification.
• Failure to put it in writing. Professionals expect contracts, which protect everyone involved. A signed contract should be nonnegotiable.

Almost every successful business owner has learned these lessons, sometimes the hard way. But here’s the good news: With a clear contract that spells out exactly what you’re paying for and when you should receive it, you can build strong vendor relationships before any money changes hands.

Start with a solid contract

When vendors disappear with your money or deliver shoddy work, a strong contract is often the difference between a quick solution and an extended, expensive headache. Think of it like a seatbelt for your business: You hope you never need it, but you’ll be really glad to have it when things go wrong.

Here’s what every contract should include:

• A detailed scope of work that explains exactly what the vendor is going to do, with no room for confusion
• A delivery schedule with specific completion dates that spell out when they’re going to do it
• Payment terms that protect both sides by specifying the cost and when you’ll pay
• Performance standards you can measure that define what acceptable work looks like
• Clear remedies stating how problems will be resolved if deadlines slip or work quality falls short
• A termination clause that details how either side can walk away if things aren’t working out

The key is being specific. Vague language leads to vague results, and the more detailed your contract is now, the less you’ll have to argue about later.

Choose payment strategies that protect you

Even with a solid contract, fake vendors may still find ways to take advantage. That’s why your payment strategy can be just as important as your contract, giving you some practical ways to protect your business:

• Start small: Try a test project first. A small initial project lets you see how they work, communicate and handle payments before you commit to something bigger.
• Pay as they go: Build progress payments into your strategy. Break big projects into clear milestones, and tie payments to contracted work. No progress? No payment.
• Use secure payment methods: Credit and debit cards are your friends here. They give you ways to fight back if things go wrong — like disputing charges or flagging suspicious activity. Most business scams use wire transfers and ACH. If a vendor doesn’t accept card payment, it could be wise not to pay up front without a strong contract in place.
• Keep records of everything: Make documentation part of your process. Save emails, take pictures, keep notes. Document every payment — when it was made, what it was for and any related communications.

The bottom line? Your payment strategy is one of your best lines of defense. Using credit cards and secure digital payments leaves a trail of documentation that can help protect your business.

What to do when vendor services aren’t delivered

Let’s face it — sometimes a project goes sideways. The obvious clue is when nothing gets delivered, like a website that never materializes. But the signs can also be more subtle, and the sooner you spot them, the better your chances of protecting your business:

• Deadlines keep moving with vague explanations.
• The work quality suddenly drops or looks poorly done.
• Your calls start going to voicemail more often.
• Progress reports become increasingly unclear.

When you notice these signs, it’s time to act. Here’s your step-by-step plan:

Document everything immediately

• Save all emails, texts and other communications.
• Take photos of any incomplete or problematic work.
• Gather your contracts, invoices and payment records.
• Write down a timeline of events while they’re fresh in your mind.

Make a professional attempt to resolve things

• Send a clear, detailed email outlining the exact terms of your agreement.
• Propose concrete solutions and next steps.
• Set a reasonable but firm deadline for their response.
• Keep your tone professional and focused on facts.

If they still don’t deliver

• Contact your credit card company to dispute any recent charges.
• File a police report.
• File reports with relevant authorities like the Better Business Bureau or the Federal Trade Commission.
• Reach out to your industry associations for guidance.
• Consider whether legal help makes sense for your situation.

The key is to stay professional throughout the process. Even when you’re frustrated, it’s important to keep your communications businesslike and focused on solutions. Not only does this give you the best chance of resolving the matter, but it also creates a clear record of your reasonable attempts to fix the problem, in case you need to escalate things later.

When to call in help

Sometimes you hit a wall. Maybe you’ve sent a dozen unanswered emails, or you’re staring at an empty storefront where your new signage should be. These are the moments when it’s time to bring in reinforcements. Sure, you could keep trying to fix it yourself, but sometimes you need someone with the right tools for the job.

When should you make that call?

• The vendor has gone completely silent.
• They keep promising but never delivering.
• You’re out a lot of money.
• You think it might be actual business fraud.

The good news? You’ve got a whole team of experts ready to help. Your first stop might be your local Small Business Administration office — they’ve seen it all, from minor disputes to major fraud cases. And the Better Business Bureau is like the business police who are there to protect you from bad actors.

And, yes, sometimes you need a lawyer. If you’ve lost money or a vendor has stopped communicating, talking with a business attorney early can actually save you money in the long run. Sometimes just a well-crafted legal letter from a lawyer can turn months of getting nowhere into quick action, saving you headache and stress.

Remember, asking for help isn’t a sign of weakness. It’s a sign that you’re serious about protecting your business.

Make strong vendor relationships a part of your business

Running a business means trusting people to help you grow while keeping your eyes open. Think about all those success stories you hear from other business owners — they didn’t get there by working alone. They built strong relationships with vendors and partners who helped them thrive.

That’s what all these steps are really about. When you know how to spot trouble, write solid contracts and use a payment strategy that protects you, you’re creating a foundation for growth. You’re showing vendors you’re professional and serious. And you’re freeing up time and energy to focus on serving your customers and growing your business.

Need help setting up payment methods that keep your business safe and secure? Talk with a Chase banker. We’re here to help you succeed.