What Do You Do When a Client Won’t Pay

What Do You Do When a Client Won’t Pay

You spent a lot of time building a lifetime of experience, creating a company that is your bread and butter, and working tirelessly to paint a picture of respectability with great results. You send the client an invoice to be paid for said work, and you get nothing but crickets. Perhaps you send the invoice a few times, and that few times will become a week a month, maybe even a year. What do you do? Do you go after the client? Or do you chalk it up to a bad business decision and leave it alone? Most people won’t go after the money they deserve, more worried about their own reputation than getting payment they rightly should receive. This is the kind of thought process most of these kinds of clients are hoping you will have and will use any method necessary to get out of paying you.

So, what do you do when you’re in a situation such as this? I know I’ve been here a few times over the years, and it’s not a fun place to be. Especially when a client will try to fight you on money they know they owe you. I’ve learned some lessons along the way, and hope with my advice, I can help you keep from getting ghosted as well.

Sign a Contract

It may be too late now, but you must have every client sign a contract. Make sure you have two things in there, 1. That they will pay you by a certain time or risk late fees/collections and 2. That you do not offer refunds. Of course, make sure there are other very important details in your contract as well, but these two will ensure the person will not try to get out of paying you. I would also say to make sure you add in there that invoices and time spent are non-negotiable so that the customer doesn’t use an excuse such as ‘you didn’t do this, or didn’t do that as a reason for non-payment.

Pay Ahead

If you’re working on a large project, you may want to ask the client to either pay a certain portion upfront or put them on a monthly or weekly payment plan with the last payment due when your job is done. This will help the client manage the bill and make sure you’re getting paid.

Charge Late Fees

If you’re having a hard time getting clients to pay you on time, you may want to set up a late fee clause. There’s nothing worse than people consistently paying bills weeks or months late. If you paid the utility bill late, would they leave your lights on? Likely not. Approach your business in the same manner. You shouldn’t be expected to continue to do work when customers can’t pay on time, and if they can’t pay on time, there’s a price for that.

Pay Them a Visit

If your client owes you a small amount of money, this may not be worth it, but if you’re owed thousands of dollars, you may want to stop into your client’s office to see if they can pay you on the spot. If the thought of this gives you anxiety, don’t worry, you could have the same effect by contacting another person in the company that has as much pull as the client.

Pause Services

If a client has not responded to your multiple requests for payment, and you’re still working on their account, you will have to threaten them with paused services. They cannot expect you to continue and/or finish the work you’re doing if you have no indication that they plan to pay you for the work.

Consider a Factor

According to Investopedia, “Factoring allows a business to obtain immediate capital or money based on the future income attributed to a particular amount due on an account receivable or a business invoice. Accounts receivables represent money owed to the company from its customers for sales made on credit. For accounting purposes, receivables are recorded on the balance sheet as current assets since the money is usually collected in less than one year.” (source: https://www.investopedia.com/terms/f/factor.asp)

Seek Legal Counsel

If all else fails, and you are owed a considerable amount of money, you’ll have to seek legal counsel and possibly file a lawsuit. Sometimes the threat of legal action will get a customer to pay you, and sometimes you will end up in court, so prepare yourself for that possibility.

Unfortunately, when you’re a small business or a freelancer, it’s easy for someone to take advantage of you. It’s also very difficult to play hardball when it’s not in your nature. Put systems in place to keep from any situation getting to this level. If you find it difficult to keep on top of your accounts receivable, know that VersaTel Solutions can help! Reach out to us to learn how.

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