Every freelance business has to live with the risk that a client will stiff them on their bills. When you’re delivering something of value to someone you don’t know and trusting them to pay you for that service afterwards, it’s almost inevitable that over a career of freelancing, you will eventually run into the kind of unscrupulous buyer who thinks he can ignore your invoice. So what do you do when you’ve handed over the work but the client won’t hand over the check?
- Prepare Properly By Screening Clients
Managing deadbeat clients starts with protection, and there are a number of resources that can help you screen potential clients.
Elance’s Review System
Click the client’s name on an Elance,com project description, and you won’t just see their profile. You’ll also see feedback left by other supplier. Before you even bid then, make sure that the reviews don’t include any accounts of late or non-payment.
Businessbeware.biz may be useful too. Set up by a contractor who realized that a recalcitrant payer had also refused to pay several other contractors, the site names small business customers who are more trouble than they’re worth. There’s a five-buck membership fee and it’s aimed at small businesses rather than freelancers but it’s more professional an more closely monitored than ClientsfromHell.net, a gossipy designer site.
- Protect Yourself With a Contract
Finding a review of a bad client will allow you to walk away from the problem before it reaches you, but when you do take a job, the contents of the contract will also help to minimize the risk. Those contracts should have a couple of essential ingredients:
Insert milestones to break the payment into installments. Provided you take your hands from the keyboard the moment the milestone passes without a payment, you’ll be able to reduce your losses. Clients rarely argue with these, especially when they also include milestones for delivery.
You can also ensure that ownership of the copyright for your work remains with you until the final payment has been made. It won’t guarantee you will get paid for it but it does strengthen your hand in any legal action and may prevent the client from using your work until he’s paid for it. It’s a useful addition for designers, writers and other creative industry workers.
- Send a Reminder
When you send your invoice, include a date by which payment should be made. For regular clients that’s usually before you need to send the next invoice. Once that date passes, send a reminder.
Paypal allows users to do that with just the click of a button. You can find it in your account history but as an option it may be too simple. If you need to remind a client to make payment, it’s possible that they just forgot to make the payment but there’s also a good chance that something has gone wrong. You need to discover what’s causing the hold-up and see if there’s anything you can do to unblock the payment.
Send the reminder but also send the client a polite email, asking if they have any questions.
- Negotiate Changes and Terms
In most cases, the reminder will be enough to prompt payment. Individuals can forget or may be waiting for a payment to come in before they can send another one out, and the accounting department of small firms may be too busy to reach your invoice at the right moment. A gentle nudge is usually enough at those times to receive your money without damaging your professional relationship.
The problems really begin when it’s not enough.
When the Client Isn’t Happy
Often, the client may not be completely satisfied with the work and want some changes before they pay. That’s not unreasonable as long as the demands are within the parameters of the original job description. If they’ve changed the job description though or they need more work added to it then you should:
- demand at least some payment for the work you’ve already done before you continue working for them;
- make clear that this work fulfills the contract.
That work is a matter for negotiation. The client might not be willing to pay everything but when both sides are acting in good faith it should be possible to reach an agreement that shows the client is willing to pay and proves that you’re willing to continue the work.
When the Client Can’t Pay
A bigger problem occurs when the client can’t afford to pay. Ideally, the client shouldn’t have hired a freelancer without the funds to cover the debt but not all are that scrupulous. Again, you may be able to solve this through negotiation. The two usual options are:
- to spread the payments over a longer period;
- to reduce the payment so that you get at least something even if you don’t receive the whole amount.
You can also look for more creative solutions. Agree to retain part-ownership of the work, for example, and you may be able to agree to share any revenues the work brings in as long as the client supplies the marketing or some other service. That’s going to require more trust than you may be willing to give someone who has already admitted they can’t afford to pay their bills but if it can work, it might just give you more revenues than the value of the original bill.
- Take Legal Action
If negotiation fails, then there’s nothing left to do but take action. Small claims courts may help to settle the bill for you. The fees are usually fairly low but it takes time and is often more work than the amount due is worth. Sometimes though a letter from a lawyer or debt collection agency threatening legal action is enough to send a deadbeat client running to his checkbook. The National Federation of Independent Business offers a template that small firms can use to scare buyers. It’s written for firms big enough to employ lawyers but you can adapt it for freelancers.
- Take Them Down
Legal action — or the threat of it — is usually the end of the line but some freelancers have another trick up their sleeve. Web designers, for example, have been known to take down the sites of clients who haven’t paid their bills. That’s not always legal. According to Gaebler.com, a resource for entrepreneurs, designers can take down sites for which clients haven’t paid their hosting fees but not sites hosted by other servers. When a site is taken down, the freelancer also has to take care not to post anything defamatory as an explanation.
- Write it Off
More usually though, if you’ve taken precautions by setting milestones then the amount due will be low enough to be able to write off the debt without too much pain. That’s often the action taken by clients faced with unpaid invoices, and freelancers will have to take into account that a small percentage of bills will be left unsettled. It’s the same kind of risk that stores take when they leave objects on shelves and invite in a public that may include some shoplifters.
Fortunately, most client are easy to work with, do pay their bills and even pay them on time. The ones that don’t pay tend not to stay in business for long.