There may come a day that you’ll have to deal with a client who either do not pay or pay late. There may be valid reasons why a client does it but when it becomes habitual or its way past due, then it becomes a problem. They are what we call non-paying clients.
Before discussing how to deal with it, let’s find out the top reasons why a client does it first. “Y U don’t pay?”
Holding The Payment As Hostage
This usually happens when a client has something that needs to be worked on and will use it as a reason for not paying. They will ask you to address the issue and once fixed, only then they will pay.
Too Busy or Understaff
This recently just happened to us. We have sent an invoice months back and assumed that they were just collecting funds to pay us. When it reached our allotted days for them to pay us, our accounts called them only to find out that they thought it was already paid.
Some clients do not pay not because they cannot but they just are too busy or the person who’s supposed to take care of payments is busy. A client who is understaff can lead to this. An understaff client is usually disorganized and misplacing a document and overlooking an email which can be your email about a payment are most likely to happen.
They just don’t have the money. Their own clients may not be paying them as well so it leads to you not being paid.
Long Completion or Unsatisfied
Some clients do not pay on purpose. This is their way of getting back from not being satisfied with the job or for taking too long to complete a project.
Don’t Want to Pay (duh)
Unfortunately, there are clients like this. They constantly give a number of excuses in hopes that you grow tired of asking for the payment.
So now that we have an idea why a client does not want to pay, how do we deal with it?
Like dealing with any problem, you must assume from the beginning of the deal that it may happen. Start structuring your relationship, lay the ground work and start building rapport with your clients so dealing with whatever comes will become a lot easier.
Do Your Research
If you have little to no idea about the client you’re about to deal with, research about them. Google them. Ask around and find out more information about the client.
Look up their website and check if they have listed there their partners or suppliers. Give them a call or shoot them an email.
Prepare a Contract
Regardless of who the client is, be it a friend, a celebrity or a respected business leader, a written contract must always be in place.
A contract should have the following:
Terms of payment
Scope of work (be very specific)
Target Project delivery date
Late payment policy
A contract binds a client legally and protects you as well. This saves you a lot of trouble later on come payment time.
Subject Matter Expert
If your budget permits and the situation becomes regular, consider hiring a debt collector. An experienced debt collector whose only job would be to contact clients in any way possible to collect the payments.
How would you know if someone good at debt collecting? During an interview, do a role play and let them collect money owed from you. Throw the most unreasonable excuses for not paying. If he or she has rebuttals and does not sway from the point of collecting money, you’ve found gold.
Put Up an Installment Term
Best if you can get a deposit at the start of the project. If you cannot get a deposit, ask them to pay installment. Set the project in stages upon development. Before moving to another stage, let it be clear that a payment from the last stage must be paid before proceeding.
Evaluate its Worth
If the unpaid amount is not that much and your business can continue without it, you might want to consider chasing the client. The amount of energy, time, cost and effort may not be worth it. You could end up spending more than what the client could have paid.
Involve Third Party
Take Things Legal
If all else fails then it may be time take things legally. Do this your client clearly does not show any intention to pay. You can start with meeting with an attorney and ask for advice how to take things further in a legal way.
Conclusion is that prepare from the start and understand whether it’s worth signing up with the client or not. Always have a clear set of rules and standards. If something about the client makes your radar go from east to west and vice versa, trust your guts and don’t sign with them.
The tips above will let you avoid the sour situation and will let you know how to deal with it should it happen.
We’d like to hear from you. Email us or comment below with your non-paying clients.
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