For most employees, getting paid is a monthly ritual, offering a certain amount of security that money will come in. For freelancers and business owners, it’s unfortunately not so simple.
There will always be a small percentage of folks who intentionally try to avoid payment to cheat businesses and professionals who have provided them with a product or service in good faith; there are also clients who have good intentions but are dealing with an unforeseen crisis.
Even so, unpaid freelancers can have difficulty surviving, and businesses can only succeed when clients respect their end of the bargain. There are several strategies that companies and individuals can use, including advance payments, friendly reminders, and filing a legal suit, to ensure payment.
Requesting a Payment
Many people naturally shy away from requesting payments due because they do not want to appear aggressive or rude. Money, especially when owed, can be a highly uncomfortable topic, but not paying your bills on time can be equally painful. So, often, asking for a payment due is unavoidable, no matter the discomfort.
You can ensure you receive payment and maintain an excellent professional relationship with your clients in several ways, as follows:
Contracts Should Include Payment Terms
Contracts are an essential tool for businesses, professionals, and freelancers alike. You need a well-written, signed contract to have a leg to stand on legally. If you need to pursue a payment legally, yet you have no proof of your agreement, and it’s a ‘he said, she said’ dilemma, and if your client has ample resources in terms of legal representation and finances, your battle for payment may end up costing you more than the outstanding debt itself.
Contracts should be detailed concerning payments and comprehensive payment terms, including milestones with dates, additional fees, late fees, and even restart fees. Never pay your employees or assistants with your money for a client’s project; your client should make regular milestone payments as the work progresses, so you won’t lose time and money if a client interrupts the project or payments.
You want to avoid debt for someone else’s project; if the client returns later, charge a restart fee after the interruption. Make sure to include these terms in the contract.
Consider adding a client billing information form to your contract so that you have the info from the start.
Ask for a Client’s Billing Information Early in the Project
If the client’s billing information is not included in the contract, ask for the proper billing info immediately and never assume who you should be billing. Often, intermediaries are used during contract negotiations or stipulations, and they are not responsible for payments.
If you are working with a company, it most likely has a financial department or a specific employee that handles payments. Avoid making assumptions, and ask for this information early. Be sure to receive the proper billing info before you request payment; you may ask for an alternative billing contact, if necessary.
Offer a Discount for Upfront Payments
Offer a discount to encourage clients to pay in advance. Clients who are interested in getting a project completed will be delighted with the opportunity to receive a discount; you can also offer an extra service for free as an incentive to advance payment.
Confirm That Your Billing Invoice Has Been Received
Once you’ve sent a billing invoice, if you are still waiting for a response or alert that your invoice has been received or viewed, contact your client and ask if your invoice has been received. Should your client say they have yet to receive your bill, offer to resend it – and perhaps in a different format – to be sure.
Offer Assistance
If your client says they have not received your invoice or indicates a problem with the sent invoice, offer your assistance. Offering help is a much softer approach than just demanding payment; perhaps they need another copy, an updated address, or your banking information to send the payment – they may also need a little more time to pay.
Whatever the case, offering assistance is the first step to resolving potential issues before they become problems; it’s also a great way to build long-term relationships with clients.
Remind Clients That Payment Is Due
Businesses and people can and do innocently misplace invoices, or have so much work that they struggle to remember a payment is due. You can use an automated payment reminder system, but a personal reminder will contribute to building long-term relationships crucial to business and professional success.
Avoid sending reminders to those clients who pay promptly, and focus on those who may need them. Courteous reminders can be sent several days before the payment is due or on the due date; consider the client, as some people may be offended by a sent reminder. In exceptional cases, take the time to make a personal phone call and inquire if there are any problems that you can assist with.
The Legal and Financial Consequences of Missed Payments Should Be Clear
All late payment fees and legal consequences should be clearly stated when signing a client contract; whether there are late fees, what the charges are, and if there are grace periods all need to be specified.
It’s also essential that you follow through if you want to ensure payment; there’s no point in having rules if you don’t enforce them. Do consider any problems your client may be having and how much leeway you can afford, but reiterate that, despite any grace period you grant, there will eventually be consequences; stipulate a final deadline, and then follow through with the consequences.
Go to Court or Consider a Collection Agency
If you have signed a detailed contract with explicit payment terms, and your client does not respect them, take your client to court. Depending on the unpaid fees involved, you can file a claim in small claims court.
An alternative to initiating legal proceedings is hiring a collection agency; it will cost a percentage of the payment you are due, however, these agencies specialize in debt collection. When selecting a collection agency, choose one that is bonded and licensed.
Final Thoughts
One of the most potentially devastating effects of unpaid invoices for businesses and freelancers is how it affects cash flow. A lack of cash, in turn, can compromise business operations, and mean the difference between paying the rent and eating for many individuals. Unpaid invoices are a frustrating aspect of managing a business or an activity, but with proactive policies in place, you can reduce your risks
Srushti Shah
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