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What to Do If a Client Won’t Pay

What to Do If a Client Won’t Pay

This 4 step process will make sure you get the money you’re owed. 

What’s more awkward than asking for money?

Answer: Asking for money over and over again.

This topic is so cringe-worthy, but is something you have to be prepared for in your business. 

The first step in quick money collection, of course, is to be really clear up front with invoicing and terms of payment in addition to obtaining a signed agreement prior to starting service work, if possible. If the invoice goes out a month past the due date, you can work through the following steps. This may not work for every type of client, but this is the process I’ve found effective and only have had to write off one or two small losses in the history of our company. Usually, the money is in hand using just steps one and two. 

Follow these steps to stay in a position of strength and keep the door open for future work with the client:

1. Clear up any confusion. Call your client contact to inquire on the outstanding invoice. Escalate this to the decision maker (department head, President, owner of company, etc) if you’re not making any progress. You can say something like this: “I’m calling because you have an outstanding invoice and I wanted to answer any questions you have.” Don’t say anything else until they say something. At this stage, you’re fact finding and assuming they have a question or the right person just did not receive the invoice. “Is there someone else I need to send the invoice to?” If they say that it was already processed or will be processed soon and put it in the mail, say, “Great! When can I expect that?” It’s important to pin them down to a day and say, “Wonderful. Thanks for taking care of this and if I don’t see anything by [date they gave you], I’ll give you a call back.” This lets them know you’re paying attention and that you’re going to be personally reaching back out to them. (The psychology of this step is that you’re harder to ignore as a person speaking to another person than an invoice that arrived in their inbox or mailbox and got conveniently buried. The point is to make them feel personally responsible for getting this thing taken care of). 

Have your signed agreement on hand and be prepared to share with them at a later point, if need be. Don’t send it their way just yet, just get your hands on it to remind yourself that you’re in the driver’s seat in this situation. 

2. Be helpful. If you’ve tracked down and spoken to the decision maker and their designated date of payment has come and gone with nothing resolved, call them back and offer setting up payments to get the invoice taken care of. You can say, “We’re happy to help you if you need to break this up into a few different payments. Do you want to pay biweekly or monthly? What credit can we charge the invoice to?” Try to nail down a credit card you can charge on approved dates or a specific date you can expect to receive a check. Make it clear that you’ll be calling to follow up if you don’t receive payment by the designated date. (The psychology of this step is to show them you’re not taking no for an answer. There’s also something super effective about subtly implying that they’re in need of a payment plan- ie in financial trouble-  and that you’re happy to help. This ignites a bit if pride to get the situation taken care of). 

3. Gently remind them of the signed agreement you have if you still haven’t had success collecting on the invoice. The outstanding invoice can be resent with the a digital copy of the signed agreement attached for extra effect. Only mention this after persistently following up with them using steps one and two. This is a good time to touch base with your lawyer.(The psychology of this one is clear, I think. Let them know you have documentation of the arrangement). 

4. Firmly inform them they’ll be hearing from your lawyer and have them sent a letter on legal letterhead.  If they respond quickly and claim it was a mistake, let them save face and follow along in order to get the invoice paid. Then decline further work, unless you enjoy having to track down money from clients in this fashion. If this shot across the bow yields nothing, consult with your lawyer as to whether it would be worth taking the client to small claims court. 

Like I mentioned earlier, steps one and two are really effective but you have to be persistent and it is critical to get the decision maker on the phone. Don’t let them off the hook or let them ignore you. 

Get what’s yours, friend, and don’t ever go unpaid! 

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