At some point you will come face to face with the worst type of client. The client who despite numerous attempts on your behalf, is refusing to pay outstanding fees on a project.
As a business you will at some point have to go after a non-paying client, and as such should be prepared for the fight; or at least be prepared to issue the threat of a fight. Personal / Business time lengths are differential between entities but as a general rule you will know when this time sets upon you or is vast approaching when:
As an efficient and well prepared business you should have a method / set of rules in place for this very eventuality. You cannot expect a client to be prompt and timely with their end, if you are not the same with yours! The best way to address this hyperthetical situation is from the beginning…
1) First invoice not paid
I am not going to go into why you should have contracts, but simply this event is one of many in favour of working with contracts. One key point is having contracts in place that stipulate to the client how quickly they are expected to pay invoices once they have been issued. This immediately gives you a date to send your first reminder. Typically for us this may be between one and two working weeks. At this stage, our eyebrows are far from raised; there is a multitude of reasons why payment may not have been received. (Benefit of the doubt is given) For us, this is simply a follow-up email with the invoice attached as a PDF.
Example:
Dear ************,
Hope you are well. We are e-mailing in regard to ( project / reference number ) and its respective invoice sent on (date). As discussed, the project has now been completed and the invoice to the amount of (£ FEE ) is now overdue as per the agreed schedule of payment. There are a number of payments methods available as detailed in the attachment.
We look forward to hearing from you and receiving payment promptly,
Kind Regards,
(SIGNATURE)
2) E-mail not answered / Payment not received
At this point for us, payment is roughly 3 working weeks late and the client has been out of contact for approximately a fortnight. At this point eyebrows are raised. Lack of contact is an alarm bell in itself. This is where our tone in following contact needs to take on a certain level of seriousness. The first invoice at this point is followed by a phone call to enquire as per the status of payment and when it can be expected to be received. After this phone call, it is good practice to shoot the client an e-mail summarising your phone call and any agreements you may have come to, as well as re-issuing any amended invoice timescales etc. If unable to reach the client via telephone or they are uncooperative then an e-mail to the following extent is sent; as well as a letter to the same effect. Remember, your a business and as such you need to conduct yourself as one, being ‘nice’ at this point isn’t a requirement; being professional is:
Example:
Dear ************,
We are e-mailing in regard to ( project / reference number ) and its respective invoice sent on (date). As discussed, the project has now been completed and the invoice to the amount of (£ FEE ) is now considerably overdue as per the agreed schedule of payment within contract (ref number). The commissioned works were completed and delivered in full on the (DATE, 2009), and its payment has now been overdue by (TIME) days at the time of this emails composure. The bill of (£ FEE) was neither settled within ( TIMESCALE) as contracted and numerous attempts to contact you have been unsuccessful.
As per our normal practices, we must at this point (in accordance with our terms and conditions) request payment within (TIME SCALE) ( 7 days) of this contact. If payment is not received by (TIME, DATE) we will deem you in breach of contract and will take appropriate action. Detailed within our contract, we also feel it important to remind you that until payment is settled in full, all works are the full legal intellectual property of (COMPANY).
There are a number of payments methods available as detailed in the attachment. Please do not hesitate to get in touch via (CONTACT DETAILS).
We look forward to hearing from you and receiving payment promptly,
Kind Regards,
(SIGNATURE)
3) E-mail / Letter not answered / Payment not received
At this point you should revoke the use of any systems you have made available to the client if possible. (e.g a website). At this point you have several options. Our personal normal action after this is to simply to refer the matter to our solicitor. Solicitors will issue the following contact at a fee ( around £30.00 GBP ) per correspondence and keep us informed accordingly. Why get the law involved? Psychological warfare! Many people / small businesses will magically arise from the shadows and a ‘troublesome email server’ or an ‘office move’ when they receive a headed; formal; debt notification letter from a solicitor. One of these wonderful gems, contains diplomatically worded threat as to the consequences of further non-payment and absence of contact; it also establishes a deadline beyond which this threat will be acted upon. it is also advisable to discuss the matter in full with your solicitor, as in reality you do not want to word your letter threatening full civil action in regard to a bill of £1.00 GBP. Extreme example but you get the point. It often also states how the fee is likely to increase with interest / debt recovery fees should time pass by a further set time limit. You can also, simply send a similar letter yourself but we feel the fee is worthit. We also copy and type the letter as an e-mail to the same effect to the client.
4) Contact and Resolution / ‘Walking the walk’
At this point, fortunately for us in the two honest occasions this has happened, the client has paid in full with an e-mail summarising their ‘circumstances’ within days of receiving the solicitors lawyer. The key for us, was simply responding in a professional manner:
Example:
Dear ************,
Hope you are well. We are happy to confirm receipt of payment for (project / ref number) and its invoice (number / reference). Please find attached the statement of accounts and receipt of payment. (Relevant files / services will be re-instated/sent) to you within 24 hours. We wish you the best in your further endeavors and would hope you would not hesitate to contact us in the future for your design projects.
Kind Regards,
(SIGNATURE)
However, not everyone’s tale ends in a fairytale happily ever after. The client may offer to compromise, in which case you will have to decide, in consultation with your solicitor upon the terms of that compromise. Sometimes, settlement for an agreed fee is the most economical and beneficial resolution to the matter.
If after setting upon the following process, and going out of your way to accommodate your client, then you have to decide if you wish to pursue the matter and carry out your diplomatically worded threats….
How do you deal with non-paying clients?
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