By Craig Buckler

5 Tips for Dealing With Clients Who Won’t Pay

By Craig Buckler

If the current economic condition isn’t tough for you, remember that some of your clients may be suffering. That said, we all have clients who are slow to pay no matter how well they’re faring. If you’re new to freelancing, you’ll soon understand the importance of cashflow. On the other hand, you’ll also understand the importance of keeping customers happy.

I hope you never find yourself in the position of chasing payment but, remember, you are in the right (assuming you supplied what was agreed). Here are five tips to help reduce the stress caused by non-paying clients…

1. Be Proactive and Have a Process

Even if you’re a one-person company, there’s no excuse for not having a clearly defined processes and policies for dealing with late payments. Chasing money is time-consuming; having a process in-place will help your sanity and profitability.

2. Contact the Client Immediately

Contact the client directly on the day payment becomes overdue. Try not to use email — a telephone call or face-to-face meeting is far more effective. During your conversation:

  1. Ask whether there have been any problems with the work you supplied.
  2. State you have not received payment and ask whether they had problems paying.
  3. Ask when the payment will be made and agree a date. If they don’t know, state that you will call the following day once they’ve had a chance to investigate.

Be polite and don’t make unreasonable demands. In many cases, the client may simply have been away or has forgotten — you’ll be paid immediately.

3. Nudge the Client Harder

If you remain unpaid, contact the person directly responsible for paying invoices. This is fairly easy for larger companies — simply call the reception and ask. It’ll also give you a chance to build a relationship with another person in the company. In some cases, the organization may simply have a payment schedule which is different to yours.

It’s a little more difficult for smaller or one-person companies, but keep persisting. They’ll soon be dreading the embarrassment of your regular calls.

If payment is considerably delayed, write a formal letter stating a date when late fees and interest will start to accrue. Check the legal situation for your country; most have a statutory interest rates for overdue payments. US states vary between 6% and 10% per annum. It’s 8% in the UK.

4. Accept the Inevitable

If negotiations break down, write a letter stating that the client is in breach of contract (verbal agreements are still legally-binding in most countries) and you have no choice but to withdraw your services.

By all means, state that you will be instigating legal action on a specific date and they will be responsible for all debt recovery costs. But don’t make empty threats; be prepared to start legal proceedings on the understanding it may cost you more in time and money than the original payment — with no guarantee of success.

5. What NOT to do…

Never complain about a non-paying client to others — especially on social networks. It’s not professional and is unlikely to result in a positive outcome.

If you’ve delivered a web project where you’ve supplied the hosting, it’s tempting to flick the off switch or use a system such as CSS Killswitch to black-out their site. Be wary. While you may bathe in the warm glow of moralistic justification, it’s an antagonistic move which may ultimately end the relationship and won’t necessarily resolve the payment issue. In some cases, it may put you in breach of contract.

If you want to use a technical solution, provide the client with a written warning. It’s even better if you can give the impression that the whole process is automated or beyond your control in some way.

Alternatively, you could be a little more subtle. If a ‘bug’ caused, say, a security error message or shop payments to fail, the client may have no choice but to contact you. But I wouldn’t suggest you should ever be that sneaky…

BONUS TIP: Prevention is Better Than Cure

In my next post we’ll discuss how you can avoid payment problems from the start.

How did you deal with a non-paying client? Would you do the same again?

Comments on this article are closed. Have a question about clients? Why not ask it on our forums?

  • Glad to know about deal with non paying client, though it was not happens with me but I know my way to get paid.

  • So many times I’ve wanted to just gut a site when payments don’t ever come… but if the client has paid for a portion of the site, without version control (which few clients are willing to invest in), it’s super hard to roll back specific work to take off only unpaid changes and additions.

    Then again, that whole “the automation is out of my control” tact would be a great way to force users to have versioning on every site as a contractual policy, inflating the overall cost of the project while providing the developer a bit more leverage to get paid without being unfair to the client in that they keep what they did pay for.

    Great article I’m sure every freelancer will appreciate, cheers!

  • Jimmy

    I have a client that I had worked with for a while and we had a good relationship. He now owes we $750 and will not return my emails, skype or facebook messages (I don’t have his phone number) for over a month now.
    I am in the US and he is in the Netherlands. We had no formal contract, just a combination of verbal communication and email. I do have many emails discussing some of the invoices and even one where he promised to pay a $450 invoice “tomorrow” (that was 2 months ago).

    Do I have a chance in hell of getting the money he owes me? What sort of legal action could I take? Would I be able to hire a collection agency? Would it be worth it for that amount of money?

    • I would cut my loses on that one unfortunately.. Use $750 worth of time to invest in marketing to paying clients.

    • Brian

      Always insist upon a contract before doing any work! See Marco’s comment above.

      I would recommend that you watch the following video by Mike Monteiro:

      Monteiro interviewed on 5by5:

    • For $750, I would not do anything else than to setup a event in the calendar to “harrass”, i.e. send notification email, call them etc. But if that did not pan out after a while I would just cut my losses.

      Last year we wrote off around $15k as losses in the accounting, all of these being smaller amounts, going up to a few k at max. Due to the clients stopped following the down payment agreements, or flat out went bankrupt. Mainly as it cost money to claim smaller amounts, and sometimes its better just to write them off as losses in the accounting and save money on the lower taxes and not to mention time and “annoyance”.

      Though, on all larger amounts due we do take action and wont write it off until either its clear the debt collection agency wont get the money, or the company is declared bankrupt and we see there is no way we can hope to get a claim of the remaining funds.

      You will need to find out what amount it is worth it for you to keep following up on, and which it is best to take as a loss and move on. Just keep in mind that your time is valuable and the time you spend trying to collect the money could have been spent on new projects and earning money.

    • I think everyone’s right – cut your losses and put it down to experience (remember that non-payments are normally tax deductible, though). You may have had an easier time if he’d been in the US, but the cost for locating him and getting your money is likely to exceed the payment.

      In future I’d recommend getting payment up-front – or at least making them pay a significant deposit. But it’s easy with hindsight…

    • You need to factor in the fact that, when a client is an individual( not an enterprise or corporation) something bad(could be as bad as death) could happen to the person. Your client may not want to be dishonest but might just have met a situation beyond his control since he is no longer available on all available channels of communication.

  • Ahmad

    the problem is that most client did not understand the effort taken to deliver the project !
    They are not understand the effort in deliver software to work under any platform , simply because they are not understanding what it is !

    • That is an issue within our industry. I’m approached every other day by people with few technical skills who think their idea for Facebook crossed with eBay will make millions yet only cost $1,000 to create. It’s best to avoid those clients altogether or provide a little education.

  • Great article. What I do is I set up a payment plan based on phases of the project (mockups, design, applying CSS and final touches) and the client has to pay based on those phases. One phase will not continue if the previous hasn’t been paid. This way if the project is delayed, it is the client’s fault. Also, it saves me from not getting paid for work already done. It clearly is stated in the contract. I don’t set up fees or anything.

    This also has the bonus effect that since clients usually don’t pay on time, it frees me delivering deadlines on time and I can take on other projects. I mean, I think it’s a two way alley here; if you don’t pay, don’t expect it to be on time then.

    • That is a great idea, and a great incentive to pay on time. I also like how it allows you to take on other projects if the client is not paying on a timely basis.

      I think we might take a look at this option and work this into our contract.

      Good idea!

    • Our payment process is like this too. Typically on larger jobs we require 50% down (non-refundable), then usually 2-3 smaller payments after. Each payment is for the next stage in the project and is due before that stage starts. The final is due before we launch the site, deliver files, etc. We’ve tried a lot of things and this works the best. It keeps both parties accountable and ensures that we aren’t ever doing work we haven’t been paid for… So if they drop off the face of the earth in the middle of a project, we haven’t lost anything on the project (other than maybe being dissappointed that we couldn’t get the site online!) At least our contractors and employees are paid and we can move on to other things. As far as collection policies go, our contract clearly stipulates what our rights are in the case of non-payment as well as late payment. We reserve the right to stop all services, reclaim work done, and proceed with collections at the client’s expense. We have rarely – maybe once in 5 years of business – ever had to pull a site down. Most of the time simply sending a final warning letter that if they don’t pay in 7 days, we shut down email and hosting services. You should see how diligent a deadbeat client gets about payment when you send that letter. :) The other very important stipulation we put into our contract is that we retain full ownership of everything until it’s paid for in full. We still retain certain rights after the fact, but this gives us a leg to stand on for collections. We’ve never had to activate this policy (and that’s good! Who wants that kind of stress!), but it’s a safeguard. Of all of these things, the payment milestones described above, and prompt and regular communication with clients gets the most results. After all, you can’t expect a client to jump up and pay you if you neglect sending your invoice to them until 3 months after the project is done. If you stay prompt and professional, they will usually follow suit. And always, always be corteous and professional. This doesn’t mean let them walk all over you – but it does mean resisting your more Machiavellian urges. Be especially careful when writing emails – tone is hard to convey and taken the wrong way, may anger the client and even prolong the process even further.

  • Albert Naa

    I left them unattended to and one day they called me. i know it might not be the best solution but I was 18 and did not know my rights. i thought presurring them was going to make me lose their relationship

  • Had a problem recently with a client. So I asked them straightforwardly did they have a cash flow problem, and if so please pay whatever you can now and the rest later. Which they did.

  • Unfortunately I did revert to the kill switch, this was after 6months of asking for payment writing letters, phone calls and even offering a payment plan. Which was initially rejected and then offered back to me as their idea 3months later. I accepted, two payments were made then nothing.

    When I said I would refer to a credit agency they laughed at me and said you do what you need to do…

    First time ever in my 9years of operating and only 2nd non payer.. The first literally went bankrupt for millions owed so I figured my debt was a drop in the ocean for that poor bloke.

    • I think you’re unlikely to see any money but you could have considered legal action. In the UK, for example, you can issue a “Statutory Demand” — it’s a 21-day warning to settle the debt or face bankruptcy. It’s only effective if the outstanding payment is more than £1,000 but it’s normally cheaper than going to the courts and shows you’re serious.

  • Kise S.

    Am i the only one who ask for part of the payment on each milestone ?
    so after i finish the project there will be less then 10% and they usually pay it before i hand the project over to them

  • “If you’ve delivered a web project where you’ve supplied the hosting, it’s tempting to flick the off switch or use a system such as CSS Killswitch to black-out their site.”

    So replacing their home page with one that says “This website has been shut down until the client pays his bill” is out of the question, huh? ;)

  • Great article. I included it in my latest issue of Freelancing Weekly (http://freelancingweekly.com/issue-10) a once weekly, free newsletter of curated tips, articles and resources for Freelancers.

  • Jake

    I agree with all said above, but small claims is not always the answer. In many states (as here in Texas) failing to pay for services is considered a misdemeanor.

    In Texas anything between $20 and $500 is a class B misdemeanor and, if a judge rules for you (they do if you have your documentation) will issue a bench-warrant (enforceable in 50 states), suspend driver & business licenses and auto registrations for your former crappy client.

    After 6 months of negotiating and a client who stopped returning my calls/emails, I had to resort to this recently. Since it is a criminal offense, I incurred no court costs and the dead-beat (in Florida) paid in full before Texas would release him from the Florida jail after he got pulled over for a bad tail light. 6 months of ‘negotiating’ and I got paid 28 hours after Dade County police picked him up.

    Don’t beat yourself up with court time. Beat up your deadbeat clients with criminal charges. Because theft of services is a crime.

    As with all things, your mileage may vary. Check with your state about the finer points.

  • Murray

    On all the invoices that I send out I have a line that says that if this invoice isn’t paid on time then our accounting system will automatically disable the client’s website. In actual fact my accounting system can’t do this, but my clients don’t know this and therefore most of them pay on time.

    I’ve only had to turn off a website once before (it helps that I control the hosting) and that resulted in payment the very next day and an apology for late payment (this was after the client was overdue by about three months and I had sent various emails and phoned them a couple of times, and the amount was only $25).

    Remember. you’re perfectly entitled to be paid for the work you’ve done, don’t be scared of chasing the client for what is rightfully yours! Don’t worry about harming the relationship you might have with them because if they don’t pay you then there’s no point in having a relationship in the first place!

  • I’m another who does payments based on milestones. I think doing things this way creates a sense of confidence for both client and freelancer as the work progresses: the client is provided with evidence of the work being done on their project, and the freelancer is receiving payments as they do their work. In addition, I require a good-sized down payment, which I stipulate is non-refundable–since I often book projects a month or two out in advance, this protects me from signing up people who aren’t serious and turning away other work only to have the non-serious people drop out. I also have it in my contract that the completed work (whether it’s the final logo files, or the site installation) is not handed over until all payments have not been completed. These policies have served me well, although I learned a couple lessons the hard way before I put this method into practice!

  • In Australia you can report bad debtors to sites like https://creditorwatch.com.au. At least you know that the business will struggle in future to find service providers / loans if their name is blacklisted.

  • Barry

    Baseball bat Mrinal?

  • Build the site on a spare domain which you control and don’t give client access to the backend. Could also get part or full payment up front.

    Try and get access to the domain so you can delete the DNS until they pay in full. This normally works extremely well!

  • Progress payments and reviewing with client next steps in the project and the amount of resources that will be require.
    Before we proceed to next stage, account must be in good standing.
    The relationship starts with the first the first progress payment.
    It is up to us to inform client/s, even though some may not understand, the time/resources/software required to get the job done!

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