Losing Your Invoice… What Happens If A Client Won’t Pay?

It’s the farthest thing from your mind when you start a business. The little idea that turned into a fully-fledged business is now the biggest headache, and everything is threatening to crumble, all because a client won’t pay up. For a lot of business owners, a client avoiding paying is a typical issue, but one that shouldn’t ever come up. If you’re new to the entrepreneurial way of life, the fact that you have a client is relief enough, but when you’re left in a bind because you have a final payment due, the whole business can be tinged with regret, especially when you’re relying on this one client. So how can these situations be prevented?

Make Sure You Have A Proposal And Contract That’s Solid

Outline a proposal before any contract is signed. You need to make sure the proposal shows a status report for the whole project on a monthly basis as well as a schedule of payments. This helps to keep everyone that’s internal and external on the same page and motivated, so the project can stay on track. When drafting up a contract, you should make it as very specific as possible. Information such as legal fee clauses or the outcomes of the project being delayed as far as the financial penalties are concerned. Collect a retainer up front, most organizations demand 50%, and as the work is being done, be sure to document the process in as much detail as possible. If you end up going to court, you will need this to cover your back.

Get Legal Help

This should be a last resort, but if you’ve not been able to successfully obtain your payment, you will have to get legal help. Hire an experienced debt collection attorney or one who works on cases of breaches of contract. The costs will be front loaded of course, but if you emerge victorious from the legal wrangle, the client will cover the payments as outlined in your contract. Make sure to send an official letter to the client, and include the proposal, a copy of the contract and inform them you will be proceeding with legal action. Also, send these to the company attorney if there is one, their in-house public relations team, and the immediate contact. Usually, a letter of this magnitude will make them pay attention, and they may try to settle before the case goes to court.

A Couple Of Hints…

It is always so tempting to give these clients a public shaming, and social media can seem like a purpose-built soapbox, but try and maintain some decorum in this instance. Don’t forget that you have other clients or prospective ones, and you need to be professional at all times. In addition to this, the benefit of hindsight is a wonderful thing, and in the future, one approach to payments would be to divide the fee into sections and send an invoice for each section. So if your work has very definable sections, send an invoice once one part is completed, and when you receive payment, you can press on with the assignment.

Leave a Reply

Your email address will not be published. Required fields are marked *