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Unpaid Invoices: What to Do When a Client Doesn’t Cough Up the Dough

Everything goes smoothly on your end. The client approaches you with their requirements, you provide a quote―which they agree to―and you take on the project.
After spending time, effort, skills and resources, the work is completed. The job is completed before the deadline; the client is delighted with the end result; and now you can sit back, relax and wait to receive your hard-earned money.
Except that the waiting part seems to drag on… and on… and on.
Soon the due date for the payment passes, yet the client remains strangely quiet. Now the bills are piling up and the stress of it all is starting to take its toll.
For freelancers, startup founders and small business owners, unpaid invoices are one of the banes of our existence. And somehow, it seems easier for clients to get away with ripping us off―which they can and do.
My parents, who run their own company, have to deal with this sort of nonsense often. They’ve even racked up tens of thousands of dollars in unpaid invoices by a single client. In the end, they usually resort to aggressive tactics, which I have to admit works more often than not. But if you don’t have the stomach for threats, here are some less intimidating ways to go about getting your money.

First of all, don’t jump to conclusions.

It was a client I had never worked with before. And for some reason or the other, I was apprehensive of accepting the contract. But I did anyway. It was a rush job, and I delivered the document well before the deadline. He was very happy with the work, used it and then seemed to disappear.
I sent him a couple of messages about payment (although I have to say that I didn’t wait very long), but still nothing. I was furious. My thinking is that if I do my best to ensure that the client’s work is done on time, then surely they can extend the same courtesy by paying me promptly?
Anyway, I had already started crafting a nasty warning letter in my head (clearly my parents’ practices have rubbed off on me!), when I received a notification stating that not only had I been paid, but the client had given me a lovely bonus as well.
Turns out that he had never before used the platform that we were using for all contract-related activities, and so had some trouble with making the payment. The point is that you should get your facts straight before doing anything hasty:

  • Make sure that the invoice you sent was correct and that it was delivered to the client successfully (remember automatic spam filters).
  • Ensure that the stipulated due date for payment has passed.
  • Review the contract (if there was one) and all correspondence with the client to see if there were any mistakes on your part (like payment address) or some payment detail that could have been misunderstood.

Reach out to them as soon as the payment due date has passed. 

Many people will wait a week or two after the due date before reminding the client about payment, but I say that you should start as early as possible to avoid any further delays―especially if the payment terms already gave them 30 days to pay. A subtler way to do it is to simply ask them if they received the invoice after you sent it.
So, how should you contact them?
First send a polite, friendly email and attach the original invoice to give them that extra push. Don’t even hint at hostility. Sometimes (if you’re lucky), this is enough to get them to pay you.
After a few days / a week of silence or non-payment has passed, pick up the phone and call them. Still, keep it calm and pleasant. Ask them if there are any issues with payment and confirm that they’ve received the invoice. 

Move on to “Past Due.”

If one email and one phone call don’t work, send them invoices via email or even post, every few days, to start putting the pressure on them. Throw in regular phone calls too, because this puts them on the spot.
State clearly that the payment is past due. If you did in fact have a written contract with them and/or a “late fees” condition, be sure to mention that as well. Although the frustration must be mounting by now, don’t give any indication of anger. Remain professional.
Now your next step depends on your patience, your company’s policy, your relationship with the client and your circumstances. Decide how long you’re willing to wait before you tell your client that you’ll be forced to take legal action against them if they don’t pay you. For some it might be one month after the payment due date, for others it might be up to six months or even more. Don’t let this drag on for too long though.

Seek professional help.

Regardless of who you are and what resources you have available, getting a third party involved should be your absolute last resort. They’ll do the dirty work for you. If it does come to this, you have a few options:

  1. Consult/hire an attorney, who will recommend your next steps. Sometimes a threatening official letter from an attorney is enough to frighten clients into payment.
  2. Work with a collections agency, which will pursue the client for you. Remember that these agencies charge a percentage of the fees that you recover, but usually don’t charge if they don’t get your money from the client. Ensure that it’s a reputable agency.
  3. Take the matter to a small claims court, but check your state’s regulations concerning the dollar limit that you can sue for.

What not to do…

Whatever you do, don’t compromise your professional integrity at any stage of the collection process. Always be polite yet firm; don’t stoop to using abusive language or making (illegal) threats.
Also, as much as persistence is the key to getting your money, don’t wander into harassment territory―avoid repeatedly targeting a single individual when it’s a company who’s not paying, and only make contact during business hours.
I know how tempting it can be to call out a client publicly, especially on social media. Although this can be effective in spurring some action on their part, it really doesn’t reflect well on you or your business. However, if you are adamant about making others aware of the situation, write the review or warning in a neutral tone and stick to the facts. And do it only as a last resort.
Some clients―and I say this from experience―delay payment in order to get more work out of you than was originally agreed upon. This is a sneaky way to implement “scope creep.” If a client is not paying, do not continue working with them on another project or even the same one (if they were supposed to pay you according to project milestones, for example).
A lot of people suggest that at some point, you just have to call it quits. I don’t agree. Unless chasing after a client is really draining your time, money and other resources, don’t let a non-payment slide. Too many people take advantage of freelancers, startups and small businesses; furthermore, giving up is exactly what unscrupulous clients hope that you’ll do.
If the client eventually pays, but you had to go through a lot of hassle to get the money, do not―I repeat, do not―work with this client again. Most of the time, the business they give is not worth going through all that trouble again. And if they happen to ask why you don’t want to work with them, be honest. Who knows, perhaps they’ll learn their lesson. (Unlikely, but it’s worth a try!)

Lessons for the Future

Prevention is always better than cure. After your first bad experience with a client who doesn’t pay, always make sure to do the following when taking on a new client/project in the future:

  • Before even considering working with a new client, check their track record of paying other vendors. Heed warning signs: mentioning a low budget, a company that seems to be in trouble financially; not listed on any site and no hint of a physical address; and/or bad reviews online. Sometimes a quick Google search provides all the information you need.
  • If a client doesn’t have the greatest reputation, you don’t have to write them off completely; it just means that you have to make some adjustments, such as: asking for partial payment upfront; working on a small, trial project with them first; or setting up milestone payments so that you are paid throughout the duration of the project.
  • Before any work starts, always, always, always draw up a clear contract that both parties agree to. This should describe all deliverables (in detail so that no scope creep occurs), deadlines / project time frames, the handling of disputes, payment terms, etc. If possible, get a lawyer to draft and/or check the final contract.
  • Consider charging interest for any late payments. If you do this, though, it must be clearly outlined in the contract so that the client is aware that there will be late fees.
  • After the work is done and you send them the invoice, get them to confirm in writing that they received . You can also get them to sign an acknowledgment and acceptance letter, which states that they’ve received the completed work and that they are satisfied with it.
  • Be sure to save and keep on record every single bit of correspondence that you have with the client.
  • Know your legal rights when it comes to these matters, and/or have access to a legal professional who’s experienced in business matters such as this one.

Need some more ideas for getting clients to pay? 
– 15 tips from 15 entrepreneurs for dealing with a client who won’t pay
– The most effective debt collecting email I ever wrote
– F*ck You. Pay Me.

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