What to Do When a Client Won’t Pay

Posted on September 13, 2019 by in Business | 23 comments

What to Do When a Client Won’t Pay

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.

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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!

[Your name]

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

Dear [Client],

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.

Sincerely,

[Your name and contact information]

Final Thoughts

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

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23 Comments

  1. Out of 100 Clients every year, I face a similar situation where client gets the work done and refuses to pay the final 50% by giving out silly excuses like , I haven’t used the site as yet and not getting benefit from it.

    😒Well this is not our fault, but nowadays we keep up the digital correspondence “Email & Whatsapp Chat” with client as a proof of what was said and what was delivered. If the clients doesn’t pay up we simply send a final reminder and if amount is big we send a legal notice with actual digital correspondence attached. Even if they don’t pay up, we simply close their website. Sometimes, they do pay but after a lot of pestering.

    And lastly, after a while with final disconnection notice and then we terminate the account of non paying clients. I know, It hurts when we lose a client but we are better at peace then worrying.

    Share your views guys… Shall be waiting..

    • Thanks for your comment! Getting a paper trail is a great idea – that way, you can go back and show the client everything they were told and agreed to.

  2. Quite possibly the funniest way I’ve seen to deal with clients not paying is the “Not Paid WP” plug-in which will effectively “add opacity to the body tag and decrease it every day until their site completely fades away”.

    • https://github.com/SurfEdge/not-paid-wp
      it’s a great feature and helpfull as the customers will contact you and complain about your site so you can complain about their payment moral. Especially needed in Germany! I would say not at all needed in the US as our US customers always even payed upfront all while German customers try to get away with 50% or 75% and then won’t pay the rest.

      For one customer – at that time done with TYPO3 – I have added also a text in the header of the website and changed the Flavicon accordingly – also that worked out – not for me but for the developers he asked to take over the site and to “repair” it – they asked upfront for 120% I woudl say and nobody actually did it – he moved the site to be wordpress afterwards as here he was able to find devs who did not READ the notices in the sourcecode – and they probably faced again the same problems.

      Developers can help themselves by adding notices in the sourcedcode as long as a site is in development and if it is not fully paid – also concerning ownership.

      You can also save all sites you have done on the last payment date on archive.org (including the text in the sourcecode) – it can be helpful when you need to go to the court to get your money. Archive.org can also be pretty helpful to SECURE your work – especially if you work for other agencies and have no NDA or if you fear that you design or the content you have created woudl get copied by other developers who don’t respect what you have done as.

      • Thanks for your comment! Great tips, and I definitely agree about clarifying who owns the product until it’s paid in full. I’ve had to do that – it’s not a surefire way to get paid, but it’ll protect you legally if it gets that far.

  3. Unfortunately, honesty, honor, integrity are all considered “weaknesses” in our culture, so actually, finding a client that DOES pay on time is pretty rare. Most drag their feet and require some prodding … and some you will never get anything from. In my 20+ years of freelance, I’ve identified a few giant “red flags” that I look out for, and if a potential client says anything like this, you should just politely walk away: 1) “I have this really simple job that I need done – it should be super-easy for you” (it’s never simple, and it’s never easy because they will suck the life out of you) 2) “I have this little job I need done, and I have a budget of $XXX” (the job won’t be little, the budget won’t be nearly enough for what they want, and they will suck the life out of you with nitpicking and asking for more “free” work) 3) “I have this job I need done, budget is whatever it takes – I don’t care – just need it done…” (but they won’t pay anything up front because, …. y’see, cashflow right now isn’t what it will be in a month, and they’ll pay you *crazy* money once their amazing idea/product/service is rolling in cash …. cash that you’ll never see any of).

    It’s human nature that once a client has what they want from you, they forget your name. Never, ever, ever, ever give final work to a client before you are paid unless you have an ironclad contract and a junkyard dog of a lawyer on retainer. It’s not that people do this to be evil (most of them anyway), again, it’s human nature.

    Look up Mike Monteiro’s presentation on Vimeo called F$%k You, Pay Me. Entertaining and informative.

    • Thanks Joe, and I’ve experienced all of those clients, too! Noticing those red flags is excellent, and it’s so important to turn that work down even if you need the money – in the end, you just dilute what you get paid and end up with a headache.

  4. I never do any web design work without first being paid in advance. Easy. Hassle free. Always works.

    I’ve been working on a very large 60K project that has spanned over a year and includes several marketing system components that extend beyond the initial design. The client has always paid as we go in advance for those as well.

    As a creative service provider you should ALWAYS make sure you get PAID for your work! They are paying for a lot more than just design if you also have years of experience and bring much to the table. Anytime anyone demands to pay AFTER the work is done… I happily send them to someone else to deal with. I prefer to work with PAYING clients.

  5. I have been fortunate to only have one bad experience with a client who refused to pay the final portion of bill. The experience did force me to reevaluate my contract and in doing so, I added the following in hopes to eliminate a problem in the future: “I am sure you understand how important it is as a small business that invoices are paid promptly. Invoices not paid within the time constraints listed above will be assessed an additional late fee of % per insert time frame here. If the final payment is not received within 72 hours, NAME OF COMPANY reserves the right to take the web site offline and the client will lose all rights to its use or duplication.” Haven’t had any issues after adding that caveat:)

    • Love it, and glad it’s worked for you! I’ve found something similar – that the clearer I am upfront, the less of a problem I run into.

  6. Having been in this business for 23 years, I’ve learned to be a hardass about things. My contract states 50% deposit and signed contract and deposit must be received within 10 days of the date on the contract or contact is no longer valid. I will not start any work on the site until I have that signed contract and deposit. If the prospective client has a problem with that, they can go elsewhere. I’ve learned that if they have a problem with it, it will become my problem when they won’t pay. It also states that an additional 25% is due in 2 weeks. If i don’t get the 2nd payment, all work stops until I get paid. If they don’t pay me, I’ve got at least the 50% deposit. Final payment is due within 5 days of completion of the project. Since on smaller projects I guarantee completion within 30 days, I also add a statement that if the the site isn’t completed within 30 days due to client not providing needed content, final payment is due and website will be completed as soon as possible upon receipt of needed content. However, if it’s not due within 30 days and I have received all needed content, the final payment is reduced by 50%. I’ve never had to reduce the final payment but several times I’ve received that final payment and still waited for months for the needed content. I am, right now, waiting for content on a fully-paid-for site. If I’m hosting the site, I’ll launch the site and invoice final payment. If I’m not hosting, the site gets launched when I get paid. I rarely have a problem with this and since I started this policy have not once had a client not pay me.

    • I’ve done something similar, and while it’s a lot to track, it does work – as long as you have a way to not deliver / publish the final product, which it sounds like you do. Glad to hear you’ve found something that works so well!

  7. I’m slowly moving away from this freelance business model…Well I’m not going to stop. It just won’t be my main priority.

    It’ll probably be my secondary or third source of income. I’m working on something bigger and better.

    The “Not Paid WP” is funny! I could use a plugin like that.

  8. I try to keep it as simple as possible, so I ask for 50% upfront, build the website on a subdomain on my website and only when they pay the final 50% do I upload the website on to their domain.

    Also, I include in the contract that I own the website and domain name (if I registered one on their behalf) until they pay in full. That way I can always reuse the website for another client if need at some point in the future.

    This gets rid of anyone who thinks that they can get their website live and string out the final payment. These are clients that you don’t want anyway so if they don’t like the terms you are better off without them.

    • Hey Gary – I couldn’t agree more with that last line – those are definitely not the clients anyone wants to work with!

  9. 50% upfront and the final balance of 50% before the website is uploaded on clients domain tends to work for me.

    Plus, I include in the T&Cs that I own the website until it’s paid for in full.

    • That seems like the way to go for developers and designers!

  10. Right now, I ask for 50% upfront deposit and then bill monthly for work completed. This ensures my billing is up to date. However, my payment policy is asking for payment within 30 days. In today’s age, perhaps this is too long. Maybe 10 business days is a better timeline.

    With respect to ongoing website maintenance, would your recommendations change? Once a client goes on my website maintenance, I charge at the end of the month and ask for payment within 30 days. I think I should revise this to protect myself. Any thoughts?

    • Hey Allison – It seems that a lot of developers and designers do well with the 50/50 plan. As a freelance writer, it’s a little different for me – I can’t take back completed work I sent or ensure they won’t publish it – so I do well with 100% upfront. For a retainer like you’re talking about for the ongoing maintenance, I would charge in advance, or at least shorten that payment window to 15 days instead of 30.

  11. Haha, I definitely need it This post really helped me. Thanks for sharing it.

  12. Excellent post, because I told three excipients the following phrase “I suggest you look for another provider” thanks

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