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What to Do When a Client Is Not Paying

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When we become an entrepreneur, we are in charge of everything: project management, customers, and finances too. In an ideal world, your clients would not be trying to negotiate your rate and would always pay on time. What can you do when a client is not paying? What are your options? There is no need to panic. You only need to read the following lines carefully. Unfortunately, it is something familiar in the self-employed workers’ world.

First Step: Contact Your Client

If a payment is late, the first step is to contact your client. He might have forgotten to proceed, or the money might already be on its way. Make sure to have all the related documents with you too. You will then be able to use the signed contract and remind your customer that according to your terms, you now need to be paid. Do not jump to the demand letter step yet. Start by sending a courtesy email saying that the payment is due or an account statement. If you do not have any feedback in the next 48 hours, try to contact your client by phone or by mail. Most of the time, the payment is sent right away.

Second Step: Add Consequences

If you talked with your client and you are still waiting for your payment, it is time to add consequences. Stand firm, and do not accept any excuses. You can decide to add late fees according to your terms or not taking any new projects as long as you are not paid. Consequences can speed up things. Do not work for nothing.

If you are not able to talk to contact your customer (he seems to have disappeared without trace), become a private investigator. Is he an employee? If it is the case, it is not impossible that he is not there anymore. Try to contact his boss or a person working in the accounting department. Do your emails are bouncing? Is his phone number not available anymore? If it is the case, you might need a collection agency for help.

Third Step: The Legal Options

If you still have no payment, it might be the time to use legal options. Although it might seem complicated, remember that all work deserved to be paid. The demand letter has the goal of showing that you are ready to go to court. It is essential to send the notice of default by registered or certified mail with an acknowledgment of receipt. You can even write your demand letter or ask a professional worker (like a lawyer) to do it for you. Do not forget to keep a copy and to have the proof that your client has received it too. The demand letter is not mandatory; however, it shows that you take this matter seriously. It can also be asked or used by the judge.   

The next step is legal action. You can decide if you want to go to court. Of course, we suggest you calculate how much it will cost you and see if it is worthwhile. Feel free to contact a lawyer if you have any questions.

A Few Tips on How to Prevent Non-Payment

Since it is not pleasant to deal with a non-payment situation, here are a few tips that can help you to be paid on time.

1- Make a contract

Take the time to write a work contract with your conditions, send it to your customer, and ask for his signature before starting anything. In this way, your client cannot say he did not know about your terms, fees, and late fees.

2- Do wait before sending the invoice

Develop the habit of sending your invoice at the same time as your work and not a few days later. Besides not forgetting to send your invoice, there will be more chances to be paid quicker.

3-  Provide advantages to your good clients

If you can afford it, a way to encourage your clients to become good payers is to offer a small discount when they pay you quickly. It could be a 5% discount on the invoice when they send you the payment in the ten days following the sending of your work. Do not forget to mention it in your contract.

4- Use downpayments

If you plan to work for a long period or if it is a big project, why not secure your payment with a downpayment? The downpayment allows you to receive a fraction of the total amount at the beginning of the work. You could ask for a percentage before starting, a percentage in the middle, and the remaining at the end.

5- Offer a bank of hours

The bank of hours can also be an attractive option since you are paid before working. Your regular customers can find it useful since they can use your hours for different projects. Do not hesitate to offer a small discount to encourage them to take a bank of hours.  For example, if you usual rate if $35 per hour, you could provide a 10-hour bank of hours at $300. 

In conclusion, do not hesitate to fire bad customers if you can afford it. You surely have other things to do than to run after your payments. Take the time to write your conditions and keep your precious time for the clients that deserve it. Good luck!