How do you handle delayed or no payment rendered for services provided?

I think this is one of the biggest challenges of running a business. I don't have any silver bullets for you, but I can tell you what I have done:

• Regular phone calls and/or emails asking for a status on payment. (One of the things I remind them is that this is my paycheck. It seems like it helps to put it in these terms. And even though it feels like begging, it isn't. You are reminding them that they owe you for services rendered. )
• Reach out to other people in the organization to determine if they might be having some kind of cash crunch or other problem. That will at least tell you something about the "why".

Also, in the "things that might help in the future" department: I try to limit my exposure to these problems. So, for example, I ask for an up front fee on most of my work (10%-50%), especially with a new client. Also, I am pretty careful about making sure that I don't have a lot of outstanding invoices with any clients. If a client is more than a few days behind in payment, I typically stop working on their project until they catch up. I'm less likely to do this with someone who I have been working with for a while, but last year this bit me because one of my customers was over 1 month late in paying over $7,000 in work. Yikes!

Good luck. I hope they do the right thing.

1) Have a contract. Have terms in the contract which state repercussions for late/non-payment. What you can do varies by state.

2) Collect (partial) money up front. This will scare off many habitual non-payers.

3) If you're doing it by credit card, have them presign a form with CC info for autobilling upon completion.

4) Hire collections. Getting 2/3rd of your money with no extra work on your part is better than nothing or spending tons of time bugging them yourself.

5) Don't hand over the keys without payment! No car dealer would do it, so why should you? Let them see the product but watermark it, don't give them account access, or whatever you need to protect your asset until its paid for!

There are two possible scenarios. First is that they are truly dishonest. The second is that they are having severe financial problems and don't have the money. Assuming its the second, many people feel ashamed and so they avoid you because they are embarrassed and stressed. I agree that it is important to ask and offer to help in some way by opening communication.

I had a client once not pay me money owed because she was unable. I kept asking for it and then let it go when she kept avoiding me. In my mind I wrote it off. Two years later I got a check in the mail from her for the whole amount and a long letter saying how ashamed she had been to not pay me and how she avoided me out of embarrassment all that time. It was amazing really as buy then I had forgotten all about it and moved on, but she hadn't.

I agree about the money up front.

If someone is truly dishonest then its another story.

You might try showing up at their offices and ask for payment. I agree with Avonelle's idea of reminding them that this is your paycheck and how you pay your rent.

Don't be afraid to put them on the spot, particularly in front of the other staff. No one wants their staff to start wondering if they are going to be next to be stiffed. Well behaved people rarely make history and don't get what they deserve.

You might also check your courthouse records online and see if anyone has posted anything about them on the Web or the BBB.

This is one reason I insist on payment on delivery even if I teach someone how to use QuickBooks or set up their company file over several sessions. Each session is paid for at the conclusion of that particular training session. I sleep better at night.

Hey Charla,

If someone is truly dishonest, and has no intention of paying you, there is probably nothing you can do. They just won't pay.

I used to be an accountant, and my boss had two very strict (unwritten) rules: he would pay no supplier until we were paid by our client; he would never pay late fees.

The only time he would pay early was once in a while when one of the owners of the company would come into our office and say that a supplier had been bugging him, so would we please cut a cheque immediately. The moral: Talk to a decision-maker.

Now that I'm on the other side of the table, I always send an email with another copy of the invoice, saying that I wasn't sure if they had received it or not, and please let me know if there were any problems with it.

That lets them know -- in a non-aggressive way -- that payment is expected by now, but gives them a way to save face ("Oh I didn't receive that invoice.").

But some people just pay late, and there may be nothing you can do about it. It's up to you to decide how badly you want to do future business with them.

i will echo what has been said about getting a deposit up front, and withholding final product until payment is received. with bigger companies on net 30 schedules, sometimes it's more difficult to get final payment before you release art, but you can establish credit with them by not starting work until you get your deposit.

if your work is design-related, the aiga has published an excellent customizable letter of agreement you may use to establish terms of any job. it includes a payment schedule that stipulates a deposit, kill fees, and really all the what-ifs to set policy up front. it's a free download at aiga.org in the business section.

Non/late payment is particularly troublesome when the client is a friend or (worse) relative. I agree with Kevin - don't even start work without a contract specifying the payment terms and get a deposit.

Friends and relatives may object, ask why do you need a contract when we're friends etc. You can say that that is just the way you need to do it (or your partner, spouse, attorney or accountant or some third party insists, if you want to blame someone else) .

Otherwise, it is like lending money to relatives. If you need it back, don't lend it them in the first place ;)

While that is definitely safe advice, Susan, I have to disagree. You may end up scaring away perfectly good clients. Most people intend to pay you within reasonable terms, but they are balancing a very delicate cash flow.

If you are making them pay in terms that their business can't support, they'll go somewhere else.

The most important thing is to have a large number of active clients, so that if one client pays late or defaults, it doesn't break the bank -- all your eggs in one basket can be deadly.

I think there are a lot of good comments here. For us, we normally do ask for half up front for new clients and bill our regular clients.

But there are a few exceptions. If they are new or not, if you have ever worked for public entities, like city governments, colleges or schools, often there's a PO involved, so you are pretty much stuck with their payment timeline.

The other exception is some recurring projects with clients who we have worked with for years. If from past experience we found that a certain project tended to stretch over a few months, we have sat down with the client, reviewed the last time we did this project, and usually end up getting some part of the payment up front. If you have a relationship with them, they will usually understand your "cash flow" issues.

Charla,

I don't think it's a matter of "don't trust anyone."

Contracts won't necessarily protect you when you are dealing with a truly dishonest person who intends to cheat you.

What contracts can do is state the obvious between two trustworthy parties. The thing is, what is obvious to you may not be obvious to me.

So please don't throw out trust. Just add in clear communications and written agreements.

Molly

When no payment came in despite reminders, one business owner I knew used to send the following note with his invoice: Please explain what makes you think I am running a charity? He would follow that up with a phone call with the same question, after ascertaining that there was no financial crunch with the other party.

Turn them over to collections and let it be someone else's problem. That way you can learn the lesson and move on.

DD

Realities about payments:

Some clients never intend to pay. Some clients pay late out of habit. Some clients pay late, because "life" gets in the way.

I recently worked with a client whom I never expected to not pay. I really expected otherwise. I sent a letter just laying it out there ... indicating my surprise at the non-pay and asking if maybe times had gotten tough and could we at least make a payment plan. I think she sighed in relief, and has made small but regular payments ever since.

Some clients actually never receive the invoices. I've had USPS mail take as long as two months to get be delivered between neighboring towns. And we all know about email that fails.

So my seasoned advice is to keep an open heart, but keep your boundaries. Once you've made a clear, loving, and thorough effort to collect what's due, like Dennis says, send them off to a collections agency.

Some collection agencies can be hired to send pre-collect letters, and those can get results.

And when you amend your contract to include late fees, etc., do have it reviewed by an attorney in your state. You want to ensure your rights, do it legitimately, and add in clauses regarding mediation/arbitration and others that allow you to recoup costs of collection, and so on. The couple of hours an attorney spends to help you with that--valuable beyond words.

The best piece of advice I've been given (by several people with different perspectives) is to remember that this is business.

That doesn't mean don't do work for friends or family, don't be unfriendly or un-trusting. What I've learned is that having clear agreements in writing before beginning work are critical. If there is going to be a payment plan, spell it out. If you need 25% to start, write that in. If they get watermarked proofs until final payment is received, make that clear.

That way, if you have an issue in the future, you simply go back to the original signed agreement.

Using a standard agreement in your industry, or one drawn up by your lawyer, is a very good idea. My sister is an attorney and helped me with a large agreement I signed. My version was so full of holes and ambiguities that it was meaningless. In a business relationship, clarity is key.

And you don't have to sign an agreement if you're not comfortable with a potential client. You can often tell a lot about how they will be to work with by the way they approach the agreement. If someone looks at it closely, asks a question or two, maybe makes an addition or change, you can bet that they will take it very seriously. Someone you're unsure about who says "yeah, sure, I'll sign that," may be someone to walk away from.

If you get to the point of not getting paid, any of the approaches and strategies people have mentioned make sense in the right situation. The ideal is to build you business and cash flow to the point where you don't have to worry if a client doesn't pay a bill.

Consider the possibility that they were not happy with your services/products and do not feel that value was received. Have they requested additional support?

If they were disappointed and you do not learn that, both of you are missing an opportunity. Generally, people who can pay do so. If they are paying other accounts and not yours, they may have a reason.

Unhappy customers are way too expensive. Were expectations met?

Marty brings up an interesting point which should also be in your contract - "Client complaints regarding anything pertaining to the services or charges must be made in writing to Company within 15 days of the date of the billing invoice sent by company. Untimely Client complaints shall be deemed late and not considered by Company."

The fact is if the customer had a valid concern silently not paying bills isn't an adult way to express it.