Tips for Dealing with Clients Who Don’t Pay
It’s going to happen in the freelance business. Eventually, you’ll come across a client who is continually late with payments or worse, never pays. A 2007 survey of independent consultants by Freelancersunion.org revealed that 77 percent of respondents had issues with non-paying clients at some point.
When you first start out as a freelancer, the collection process is going to feel awkward, and sometimes intimidating. Nobody goes into freelancing with the idea of chasing payments from clients. In fact, many freelancers are not equipped to handle chasing clients or knowledgeable about setting up payment policies. No one wants to begin their freelance career by losing potential business.
However, you may find yourself needing to be aggressive. In this economy, it can be bad business to destroy what you’ve built to a tide of delinquent customers. With a little planning, you can set clear client expectations with payment planning that will keep your freelance business flush in the future.
Prepare and Effectively Convey the Payment Rules
Even as a freelancer, you should have a clearly defined payment policy that deals with delinquent clients. After all, collections can consume lots of your time, and your time is far more valuable spent building your business and not chasing payments. Just like any other small business, a freelancer should put this policy in writing. A written policy gives clients a full understanding of what’s expected of them, and the consequences of not paying.
For instance, you may want to include when payments are due, for example no more than 30 days after the service has been provided. With payment due dates, you receive some protection, have something in writing and something to refer to if you should have to speak with the client directly. Another option you might want to consider would be to charge a percentage of the fee contracted. For example, 25% or 50% of the total fee upfront. Now, some freelancers are fearful that they’ll drive off business. However, an upfront fee signifies that they practice business in good faith, and that they’re also a client you’re more willing to deal with in the future. Better to know their mindset early on than to learn it later the hard way.
Prime the Pump
If customers know that you provide an incentive for early payment, they just might pay on time. A good example would be 5 percent off the total fee. In contrast, provide penalties for late payments for additional protection.
Contact the Client Directly
At some point, the inevitable will occur and you’ll have to either make that phone call or meet with them face-to-face. Refrain from using email when payment becomes overdue. Remember to always be polite. Don’t make unreasonable demands. Sometimes, it’s an easy problem with a simple solution. The client may have been traveling, or it could have been an easy oversight.
Start the conversation by asking if there was anything wrong with the work you delivered. This lead-in will open discussions as to what you can do to keep them happy. If it wasn’t the work, find out if there were problems paying. If it’s agreeable, suggest a new payment plan, and get it in writing. Be sure to include the “new” agreed-upon date.
No one likes it when the conversation reaches this point, but sometimes the inevitable happens. You can write a letter stating the client is in breach of their contract, and you can no longer supply them with your services. But don’t make threats. Just understand that if you do start legal proceedings you’re betting that the outcome will be successful, and that isn’t always the case.
Lastly, never, ever complain about your non-paying client on any social network. Word of mouth can have a viral effect as well. It’s better to salvage what you can and part ways. Ultimately, it’s up to you whether you should pursue legal action or not. Just be sure to carefully evaluate your decision. You need to understand that pursuing this course of action can cost you time and money. It can also have an effect on you both personally and professionally.