How to Deal with Unpaid Invoices

An overdue invoice is a freelancer’s worst nightmare. Sometimes a client’s tardiness or even refusal to pay can wreck up a monthly budget that you thought was set. For freelancers trying to make it in a tough market, that sort of lost revenue isn’t just a profit margin — it’s grocery money, rent, car insurance, and more.

Protecting your monthly budget from these unexpected issues takes a little effort, but with the right tools and know-how, you can prepare for unpaid invoices. In addition, the better you plan for these situations, the better equipped you’ll be to take legal action if you need to.

Prepare Your Clients for Invoices Before Contracts Begin

Setting the right expectation is vital. Refusal to pay is surprisingly common, as a quick scroll through “clients from hell” will illuminate. The main throughline of this article is that preparation sets you up to succeed. No matter how much you prepare or don’t prepare, you are owed for work completed. When anyone, ever, refuses to pay, don’t back down. Good preparation makes it easier to collect on an unpaid invoice, but lack of it doesn’t mean you shouldn’t try.

Oddly enough, plenty of people who hire freelancers just don’t understand how the process works. Sometimes a client simply won’t understand that they’re expected to pay — assuming that you’re working for experience or exposure. So preparation can negate the problem in the first place by chasing away clients who don’t expect to pay, or by shifting their expectations. It’s baffling, but even some businesspeople think this way.

This all starts with contracts. Setting clear rules in advance is the absolute best way to handle late payments and unpaid invoices. Unfortunately, unless you do have a business contract, it’s very difficult to chase someone down for payment that you’re owed. So do yourself a favor and start with a contract. It has the additional advantage of allowing you to vet clients. Anyone who is wary of a contract is a client you don’t want to work with. Never, ever compromise this step.

Guarantee Some Payment in Advance

There are a few ways to guarantee at least a portion of your fees will be paid. Laying out a clear set of payment options and terms can help when it comes time to follow up on an invoice. Again, the further in advance, you lay these out, the better!

One option is to require a deposit before starting work. These are generally between 20 percent and 50 percent of the estimate.

Another way to encourage payment is to offer the client options for incremental invoicing. This would allow a client without a large budget to pay split into periods rather than all at once. Whether weekly, monthly or even quarterly, it could relieve some pressure on their end and make them more likely to pay the full amount.

Make Your Invoices Professional and Efficient

A lot of freelancers are intimidated by invoicing, and will just write one out in an email or scribble it down on paper. Part of getting clients to pay on time is defining your relationship as professional and business-like. Creating professional invoices is a big part of your image as a professional yourself.

Never fear, there are tools abound for invoice creation and tracking. It’s a good idea to make use of tools to automate the process. Convenience is another big part of your image as a freelancer who demands respect. The more you can streamline the invoicing and payment process, the better. Eliminating paper is a great way to let clients know that you’re savvy, and to save everyone time. Cloud services can be your best friend here. Creating forms that can be edited and filled digitally is a great way to process documents more quickly and securely. Clients can access the document and you’ll both have a history of changes made, as well as access to a live version of the form. These sorts of perks can make doing business with you more attractive!

Don’t be Afraid to Get Legal for your Unpaid Invoices

This is the hard part. When a client is late or refuses to pay, there comes a time where communications from you won’t cut it anymore. Sometimes, you need firmer language, and when that happens, as long as you’ve done your part to protect yourself, the law is on your side.

Unfortunately, this part can hurt. In most states, you can take a client to small claims court for a relatively small amount of money ($3000-$5000). The cost of doing this is small, but it’s still a good idea to get a consultation with an attorney first.

Another option is an attorney’s letter. These can cost as little as $250 but can get more expensive if you have a complicated situation. These hold no legal weight in and of themselves, but if you’re planning to sue them for a large amount, not covered by small claims, a letter like this can help your case. In some cases, all it takes is an official attorney’s letter to get a client to pay up.

Protecting yourself from the very start of the process with solid contracts and professionally handled invoices is the best way to make sure a client pays and avoid all those unpaid invoices. And if they don’t, you’ll have established a strong case against them if you need to take legal action.

Conclusion

Sooner or later, even the most selective of freelancers are going to encounter a client who makes a fuss when it’s time to pay up. Everyone deals with it, from individuals to small teams, and even large companies. When it’s just you, that sort of confrontation can be extremely intimidating. Remember that you’re owed payment for work completed, even if a client chooses not to use it!

No one likes thinking about these situations, but the better you prepare, the less they’ll occur! Has something like this ever happened to you? How did you deal with unpaid invoices? What do you do to prepare? Let us know!

Avery Phillips
Avery T. Phillips is a freelance human being with too much to say. She loves nature and examining human interactions with the world. Comment or tweet her @a_taylorian with any questions or suggestions.
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