The Freelancer’s Cheat Sheet for Collections
Credit: Olle Svensson on Flickr
Collections — even the mention of that word puts a sad look on any freelancer’s face. We’ve all wound up with a client who simply failed to pay up. The simple truth is that we’ll probably see more down the road, as well.
There’s no set signals that we can look for that will tell us if a given client will pay or not. There are certainly plenty of jerks out there, but there are also plenty of people who just find that their own cash flow didn’t work out the way they expected. You’ve got to be willing to act on the problem, either way, rather than sitting around hoping that they’ll cut you a check some day. Here are concrete options that you can take.
- Keep contacting your client: It’s true that the squeaky wheel gets the grease. If you keep calling, sending notices of unpaid invoices and generally staying in close contact, you may get money just to make you go away. Provided that you’re polite about it, feel free to make a nuisance of yourself — such as by calling their office every day until you get paid.
- Offer new payment terms: If the situation is such that you know your client is willing to pay but just can’t right now, offer new payment terms. Tell the client that you’ll take payments spread out over time or some other arrangement. Don’t make it a habit, though.
- Ask a lawyer to write a letter: While you have to be able to back up a lawyer’s letter to make it truly effective, just hearing that you’re willing to get a lawyer involved can be very motivating to clients who need to send you money.
- Visit your client’s office: It’s much harder to tell someone that they’re not going to get their money in a fact-to-face situation and, if you’re willing to sit down and refuse to move until you receive payment, you may be able to get it. Be careful how you handle such situations, however — depending on the circumstances, the owner of the office you’re visiting can call the cops and report you for trespassing or causing a disturbance.
- Take them to small claims court: Provided that your client is located fairly near to you, it may make sense to simply take the matter to court. If it’s a sizable project, it may be worth traveling in order to bring the matter in front of a judge.
- Ask the client to return the work: If the client hasn’t paid for the work, he shouldn’t be using it. Some clients will continuing using work anyhow, but that opens them up to questions of copyright infringement since they haven’t properly licensed the work. I wouldn’t do it except in extreme cases, but that means that you can send a take down notice to their ISP if they’re using your work online.
No matter how frustrated you are about an unpaid invoice, you never want to open yourself up for legal action. You absolutely have to take the high road: don’t bad mouth your client, take any of their property or even make a scene at their offices. All those situations open you up to legal action — you may get your payment, but it could get eaten up by your own legal fees. The trick is to be persistent but polite, no matter what.
Photo credit: Some rights reserved by Olle Svensson.
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Great post, Bram – thanks! I agree that we must always, always, always take the high road. I think the real question is at what point it is worth just giving up; the longer it goes, the less likely that it will be collected, and for small projects especially, it isn’t always worth the effort. In cases like that, it’s almost worth having a semi-automated follow-up sequence that you can put in place for the delinquent client, just to keep in touch, follow-up, and make sure you’re covered, but not have to actually deal with them!
I need to know more about the take down notices to isps? Do you mean the web hosting? I work mainly with clients in other locations and have had clients who simply refuse to pay a final bill. I find it amazing how some folks can rationalize this but it does happen. Collections agents tell me it’s not worth trying to take to court long distance because the amounts are always under $1000. The last person who did this to me actually drove his entire company into bankruptcy through his bad decisions so he paid for it all in the end.
I try to bill often as I go to make sure that no one owes much at a time and have even started doing web work on my server instead of theirs but sometimes that’s not possible. And sometimes I get caught by someone who’s been paying the bills easily all along.
This is why it’s important to get a deposit on work, I require 50%, and add a late fee clause into your contracts and invoices. You never know who will take you for a ride though, I recently had a lawyer finally pay for design work completed and billed 4 months ago. Because of this my new payment plan is again 50% upfront, and milestone payments for new clients, projects bigger than say $500, or projects lasting more than a couple weeks.
@Ben, you are absolutely right – money upfront is the best practice and if a client doesn’t want to pay deposit then you know he is not worth doing business with.
This is why you should always befriend at least one lawyer. Sure, they’re a buzzkill at parties, but they’re useful!
This is my least favorite part of freelancing! I actually just shared this with a freelance friend who’s having collections issues. Thanks for the tips, Thursday!
I’m sure every freelancer who reads this has tense shoulders and raised blood pressure by the end of the article, just thinking about the times they’ve been stiffed for the bill!
Often when a client continually promises to pay, then doesn’t, it’s because they have poor money management skills, and can’t manage to scrape the cash together. It can help to offer that they can make payments by giving you a series of post-dated checks. Slow pay is better than no pay!
I’d also put small claims court as a very last resort, and not worth it unless it’s a pretty sizable bill they’ve stiffed you on. Unfortunately taking someone to small claims means an additional outlay of cash to file (which is added to their debt if you win, but still a pain) and is a significant investment of your time (which you could be spending freelancing!). Threatening to take them to court can often be enough to get them to respond, though.
I’ve been dealing with this problem recently at an agency. I was trying to get paid and getting nowhere with the accounts payable department. However, I made it the Creative Director’s problem when I told him that I would have to stop working until they caught up on payment. (I’m getting a direct-deposit payment tomorrow)
Lessons learned from this experience:
• Make payment the responsibility of the person that hired you.
• Ask about payment policies up-front (if you gotta wait 3 months to get paid, don’t take the job)
• Make it a policy to stop work after a certain amount is owed
So it goes…
-dp
Just publishing for the sake of publishing? Why didn’t you combine this article with the one published couple weeks ago http://freelanceswitch.com/general/collecting-whats-due-to-you/
The best tactic we’ve found is to add a “2% per month ($25 minimum, although it should probably be $50 now as we haven’t updated it for inflation. Doesn’t really matter though as it is very, very rarely collected) plus collection fees for past due balances” clause to our agreement. Then bill for the finance charges under a separate invoice. We don’t have to be impolite, and then when the client calls and wants to get the fee waived, we just agree to waive it if they get us a check that week but say we must get the check by X in order to waive the fee.
I would think about adding the finance charges to the same invoice, that way, if the client turns out to be really terrible you can truly cite copyright concerns being that they never fully paid the balance on the project. If the fee is separate, they could claim the work was paid for, leaving you empty handed on late fees.
It’s not about being polite or impolite, it’s about being professional, on both sides. If they are asking to waive the fee, ask them why they deserve to have it waived… I can’t imagine what logical answer they would have.
I was owed a lot of money by a very big corporation. After exhausting my time and patience, discontinuing work, resorting to threats, etc, I found the email of the CEO and of the Ethical Compliance Officer (or some such ridiculous title) and of the guy in charge of the NY office, and I sent the CEO an email (copying all the underlings who had been ignoring my requests for payment), briefly telling him my story and asking for his help. I also quoted their ethical guidelines, which are posted on their website. I sent this email on a Sunday at 10:30 pm. The CEO responded within 5 minutes, ordering the NY guy to look into it. After 9 months of crying on deaf ears, I got paid within a week. I only wish I would have done this sooner.
I found the best way to avoid the problem, at least with foreign clients is that I request 50% up front and the rest to be placed in an escrow account. This way I know the client has the money to pay and I don’t have to worry about them skipping out on the bill. I also have a Paypal account available for payments in case my clients need to float the payment on their cards. With Paypal payments I will not start working until the payment has cleared and I am able to transfer the cash to my bank account.
Question: How do you deal with out of town clients who ultimately refuse to pay? They do this knowing it will cost more to go there or hire lawyers. Any thoughts?
Even the threat of small-claims court can work if your client is concerned about his or her reputation (such actions are in the public record)–worked for me. If your client is a relatively large company, try the public affairs office; tell them about your “good friend” the reporter/editor who’s doing a story on deadbeat companies who stiff their vendors. Explain that, while you’d much rather be paid, you’re perfectly willing to give your friend all the information for the story and help make your client look bad.
I’ve been fairly lucky: only two clients in 20 years failed to pay, and the amounts weren’t enough for me to spend a great deal of time pursuing them. Instead, I just made sure that everyone I knew in the clients’ industry learned not to trust these guys!
What about collecting royalties or commison off of my sales copy?
As a copywriter it has always been a dream to work off of these terms
but is there a way you can manage this to find out how many they have sent/sold?
Thanks in advance,
Ethan.
I just found out that I live in the city that harbors, statistically, the most “no-pay” clients in the US! Before my existing clients eventually ran me in to bankruptcy, I started all new jobs by requiring my clients to sign, up-front, a contract spelling out requirements of 30% cash deposit and total payment in 10 days after delivery of completed work or else they deal with a collection agency. If they squawked or laughed (yes, laughed!), then I told them I didn’t need their “binness”. I saw too many decent people continuing to jump through hoops for their non-pay/slow-pay clients, only to end up closing their doors while those clients continued finding other chumps to ruin.
interesting / somewhat funny video at http://vimeo.com/22053820 (1-min. “advert” upfront + 10 min. Q&A at the end) which addresses this issue:
Screw you. Pay me.
by Chris Morris, VentureBeat (April 15, 2011)
URL: http://venturebeat.com/2011/04/15/screw-you-pay-me/
Most entrepreneurs – especially those in the b-to-b space – have found themselves saddled with a client who decides at the end of a project that they want to either renegotiate the terms of the deal or not pay at all.
Excuses vary – from “We ended up not using the work” to “it’s really not what we were after”. Mike Monteiro, co-founder and design director at Mule Design, replies to all of them the same way: “F*ck you. Pay me.”
This talk, explaining the philosophy and co-presented with his attorney Gabe Levine, is geared toward the creative services industry, but should resonate with any small business owner who has problem clients.
Topics covered include the importance of contract creation (along with useful tips on what should be included) and how to handle worst-case scenarios, such as clients shifting direction mid-stream and lay offs. (Warning: As you might guess from Monteiro’s reply, the language in this talk can get a bit salty.)