Let me tell you a client payment story. I once did a job for a person who was launching what would be a chain of stores. I was so excited for the big account, it sounded like a huge game-changer for me. The client had a tight turn around and so I jumped right into the first phase of logo and branding design with just a deposit. All was going great, the project went well and we met deadlines. The next payment was made without a hitch but when it came to the final payment - the biggest one of them all, the client was no where to be seen. I sent email after email, left message after message and nothing. Quite a few weeks later I did get that payment (without a word of apology for the delay, mind you) and while it did turn out ok for me in the end, this situation taught me a lot about how I need to run my business to safe-guard myself.
HOW SHOULD YOU DEAL WITH LAZY PAYERS?
- Send a friendly email reminding your client that they have an overdue payment. Keep this light, as most people get distracted by life and simply forget to pay your bill. Often, a quick nudge is all they need and they are more than happy to pay what is owed. It's important to establish the paper trail early, so make sure you are sending emails or written letters and not just nudging them over the phone - get it in writing.
- If you don't hear anything again for 2 working days, I recommend sending a second email urging them to pay their outstanding bill and reminding them that they are now outside of the payment timeframe as per your engagement agreement. Stay friendly and polite. Remember, there could be something horrific going on in the client's life that is preventing them from making payment - stay human and give them the benefit of doubt.
- Send one more email at 28 days (4 weeks) from invoice and urge the client to make immediate payment. Remind them again of the agreement and explain you will be required to take action if payment is not made by the overdue deadline, setting it at 35 days (5 weeks) after invoice. A little more force may be necessary with this email, a month is plenty of time to make payment or at the very least, let you know what's holding them up!
- Engage a solicitor to help recover the payment. Often a letter of demand is all it takes to scare the pants off someone who owes you money. This is the safest method of retrieving your money, but you also need to take into account how much is owed and make a judgement as to whether it is worth your while to engage a solicitor. They can often cost just as much as you are seeking from the client. Some solicitors may be willing to draft you a letter of demand to use in the future when chasing up client payments.
So back to my story, I knew things had to change. I couldn't keep chasing people that didn't value my time or respect me enough to pay me (or at least explain why they couldn't). I took several measures to ensure that this wouldn't happen to me again:
- I took another look at the contract that I send to custom work clients. I ensured that there were strict 14 day payment guidelines and a cancellation policy that protects both myself and my client.
- I introduced prolonged pre-engagement conversations with potential clients to ensure that we are a good fit. Depending on the project and where the client is located geographically, this conversation may occur via email, Skype or in person. This has been vital in determining if I am the right person for the job and gives us both a chance to get to know each other.
- And finally, I now request full payment upfront. This scares some people away, I will be honest with you - it might not be for you and your business. But I have found that the majority of people don't mind paying upfront!
The upfront payment has been instrumental in developing a more streamlined approach to my work. It has given me income for the weeks I am working on a project, rather than living on back-pay. It has helped both parties, myself and the client, to know exactly what each of us are getting, how much it will cost and what responsibilities we have. And most importantly, upfront payments have meant no more chasing up clients. This has drastically reduced the stress that waiting for payment puts on me and we all need less stress!
BUT WHAT IF I HAVE A WORK QUEUE THAT I AM BOOKING CLIENTS INTO?
When should you request this upfront full payment if you are booking clients into a work queue? You are still able to request the full amount without scaring a client away whose project is set to start some weeks or even months. If I am booking a client in for a job starting some time away I will request non-refundable 30% deposit upfront to hold their place in my work queue and then the remaining 70% in the week before the job starts. This gives your client time to budget for the remaining 70% while also protecting your time and any potential lost work if the client pulls out before your scheduled start date.
WHAT IF THE CLIENT IS A FRIEND OF A FRIEND?
Your client was originally referred to you from a friend that had recommended your services, can't you just ask your friend to step in? As much as this seems like an easy solution (and believe me, I know how desperate it can get, I too tried this method of payment retrieval) it is by far the least professional. I recommend staying away from this method for two reasons:
- It makes the person who recommended you feel as though they are at fault in some way. Even if you have no intention of blaming them, it's an underlying accusatory vibe that your friend can do without. There's exceptions to every rule and depending on how close you are with the referrer (for instance if it's your parent or partner) you may be able to share the issue, but as a general rule of thumb: leave the middle man out!
- It looks unprofessional! Plain and simple. The one and only time I did this, I felt as though I had undermined my authority by involving a third party that really had nothing to do with the issue. Keep it in house and ensure that you are taking responsibility for sorting out the problem yourself.
The moral of my story is to look after yourself and make sure you have a payment structure that not only appeals to your customer, but also protects you! Feel free to shoot through any questions, leave them in the comments and I will answer them all!