Professionals who work with contracts know the horror of the client who will not pay. Chasing down payments isn’t just obnoxious and time-consuming, but it can have a major impact on your cash flow for the month. If you’re relying on that money to pay a bill and then the bill becomes overdue, you’ll owe extra money in interest or late fees. Even if you’re not strapped, you should be paid for the work you’ve done (or are about to do). Waiting on an invoice payment hampers your excitement for a project and your commitment to a client. “The client who will not pay” may be an archetype in the business world, but there are steps you can take when your invoice is being ignored.
Require Payment Upfront
Partial payment will help keep everyone accountable, but full payment upfront is best. When you start demanding upfront payments, you’ll lose out on a lot of business. Some clients are gobsmacked when you suggest they pay upfront, while others will kindly say, “No, sorry, I can’t.” If you’re committed to your upfront invoicing rule, though, you won’t care about the reaction. You’ll know that you gain peace of mind by turning down a wishy-washy client.
Add a Kill Fee to Your Contract
To soften the blow of having the client pay 100% upfront, you can include a kill fee in your contract. That means that if the client rejects the final product, you’ll refund a portion of the payment. The client can’t reject the project simply to get a partial refund, though, because they won’t retain the rights to the project. A freelance writer’s contract may say, “Fifty percent of the total fee will serve as a non-refundable Kill Fee for portions of the work completed by Author but not accepted by Client. Author will retain the rights to the Project and Client shall not use any portion of the Project for any reason.”
Place a Limit on Pending Invoices
Even if the client agrees to upfront payment, that doesn’t mean they’ll actually pay it. That’s not such a big deal because you won’t have started on the project yet, but it’s still a bummer to think you have a client and then find out they won’t pay up. Your contract or invoice can set boundaries by saying, “Invoices that are not paid within 5 business days will be automatically canceled. Pricing on canceled invoices does not guarantee the same pricing on future invoices for the same project.”
Make Your Terms Clear
Even if the client is signing a contract, they may not read it thoroughly. Before anyone signs, send a brief email that outlines the main points of the contract. Here’s an example:
Hey [CLIENT NAME],
I’m so excited to get started! Before we move forward, I’d love to get on the same page about a few “small print” details. If you have any questions or if something here doesn’t square with your expectations, needs or wants, please let me know.
- My rate is $XXX and the cost for this project is $XXX.
- You’ll receive an invoice via [payment processor] and I ask for 50% upfront.
- My turn-around time is XXX business days from receipt of payment.
- Projects come with two rounds of revisions. Photos are not included.
- The remainder of the invoice is due within 10 business days of project delivery. The rights to the project remain mine until the invoice is paid in full.
Sound good? Sound not good? Let me know!
This doesn’t completely cover your bases – that’s what the contract is for – but it will clarify the details that clients commonly say, “But I didn’t know…” about. When you send the final project, include a reminder about when the invoice is due and what will happen if it’s not paid.
A Word About Late Fees
You can definitely add late fees to your contract, but if a client isn’t going to pay, they may not pay under any circumstances. Adding a one-time late fee or stacking late fees as the weeks go on can make it less likely that the client will pay at all, too. Instead of adding late fees for the extra time it takes you to hunt down payment, charge the client more upfront. For example, if they won’t pay 100% upfront but you want their business, add a 5% fee to the total cost, or simply estimate extra time when pricing the project.
Aggressively Follow Up on Unpaid Invoices
When an invoice goes unpaid for too long, you have to be aggressive about it. That doesn’t mean you should start out by being threatening or rude, but don’t hesitate to reach out to the client. First, send reminders – invoicing tools like PayPal let you send a reminder that you can customize with a note. Then, send them a separate email. You can say whatever you think is appropriate for the situation:
- I noticed that the invoice is still pending. Do you have any questions about the project or any revisions you’d like to discuss?
- I’m checking in to see when I can expect payment for the pending invoice. As a reminder, it was due on [date].
- The invoice that was sent on [date] hasn’t been paid yet. I’ll need to see that come through by [time and time zone] today. *This one is remarkably effective – there’s something about the, “I’ll need to…” that makes people feel like they don’t have a choice.
- Unfortunately, I haven’t received payment and I haven’t heard from you. If I don’t have a response by [time] on [date], I’ll have to take the next steps as outlined in our contract.
How straightforward you are depends on the client, how far past the invoice deadline they are and what you expect is the problem. If someone you’ve worked with for years is sick, you can be more lenient. If you have a new client who’s been nothing but trouble, be stern.
Send a Demand Letter
If you have a lawyer, you can have them send a demand letter, which isn’t quite a legal threat but is close enough to one to make them pay. You can also send a demand letter yourself as a preemptive move. You’ll communicate that the next step is getting a lawyer involved, which most people want to avoid.
Your demand letter should be professionally polite – you may be emotional and angry, but this is still business, and the unfortunate truth is that unpaid invoices are inevitable. Here’s what to include in a demand letter:
- An overview of the main facts, including the project name, delivery date, when the invoice and reminders were sent, and when you last heard from the client.
- A clear statement of exactly what you want. This may be the total due or it may be the total plus a late fee if that’s what your contract says.
- The day and time when you must receive payment or a response. 7-10 business days is appropriate.
- A statement that you’ll have to get a lawyer or collection agency involved if the situation continues.
Often, this is enough to get the client to pay or at least to respond and work something out. If they still don’t, though, it’s time to file in small claims court and/or contact a lawyer.
Example Demand Letter
On [date], I completed [project name] and emailed it to you. You replied the next day thanking me for the project and saying it looked great. The invoice that was originally sent on [date] and partially paid for (50%) was re-sent on [date] with a reminder to pay the balance. I then sent more invoice reminders on [date] and [date], along with emails on [date] and [date]. I’ve attached screenshots of the invoice reminders and emails.
Please make the payment of $XXX in 10 business days. To clarify, the final payment deadline is 5 p.m. EST on [date]. If you are unable to make that payment, contact me by [time] on [date] to work out an alternative payment schedule.
If I don’t hear from you and the invoice remains unpaid, I will contact my lawyer on [date] and follow the necessary legal avenues. As a reminder, this information is in the contract we both signed, which I’ve attached here for your convenience.
[Your name and contact information]
Okay, here it is: you may never get paid. It stinks, but it happens. At some point, you may decide that the cost of hiring a lawyer or the time required to go to small claims court just isn’t worth it. When you decide to take the hit and lose out on the money, try to get over it quickly. Every freelancer and business has a story about that one client who never paid and got away with it. This is also the perfect time to update your billing practices to protect yourself in the future.
Moving forward, remember that you can avoid problematic clients by trusting your gut. After you’ve been in business for a while, you can tell if a client is going to be difficult or lovely to work with after your initial contact. When you notice red flags, consider turning down the work – clients who don’t pay or who eat up your time in other ways dilute your earnings. Even if you get paid in the end, the hassle isn’t always worth it.
If you’re impatiently waiting for an invoice to get paid, you are definitely not alone. It’s common and it’s disheartening, and it’s part of what you sign up for when you’re the boss. There are all sorts of ways to grow your business, and these crummy lessons are often the motivation to demand better next time.
Do you have a story about a client who never paid? Or are you going nuts with a client right now because of this? Tell me in the comments.
Featured image via emojoez / shutterstock.com