A colleague reached out to vent on a listserv I belong to. She shared how a client she works with on a project to project basis had gotten several payments behind to her. He’d stall, put her off, and whenever a due date that he promised to pay rolled around… you guessed it–he didn’t pay. AND to add insult to injury, he was starting to get snippy with her and tell her to get off his back. The nerve of some people, huh?!
Here’s my advice to her:
So sorry for your predicament. Unfortunately, it’s an all too common one for folks in our industry who work on a project basis. I don’t know how this one will turn out for you, but there are definitely steps you can take (and things you can rethink) that will help improve your odds for ensuring payment in the future.
1. Always, always, always, always work with a contract. Did I mention “always?” You perhaps are very aware of this already, and may have even had this client sign a contract before working together. As you know, a contract doesn’t guarantee that you will get paid or that people will always be honorable and have the integrity to abide by their agreements. But contracts are legally binding and enforceable agreements. Should it get to that point, they will definitely help you prevail should it become necessary to take things to a Court.
Now a lot of times, that’s more work, more money and more energy than the debt is worth. That doesn’t mean you forgo using a contract. A contract does a lot more than just formalize your agreements. A contract helps clients take you and your business more seriously. It shows that you are a professional and helps ensure that everyone is on the same page and knows what is expected from each other lest anyone conveniently “forget.”
Likewise, it also helps ensure that you are working with more serious clients. The ones who don’t want you to operate professionally, maybe because they have intentions to stiff you in the first place, will be shooed away. So never cut corners on this, no matter how big or small the project.
2. If you work on a project basis, get some kind of payment upfront. Would a grocery store let you take home groceries and decide whether or not to pay later? Of course not, and neither should you allow your clients to do that. You are not a client’s bank. It’s not your obligation to extend them credit (especially not with new clients you have never worked with before). And the time, energy and expertise you expend on a client’s project are very tangible, valuable–and finite–resources in your business. If not 100%, get at least 50% payment upfront. It’s perfectly acceptable, established professional business practice to do so. Not only does it help clients take your business seriously, it also shows that they take their project seriously. If it’s not worth it to them to have some skin in the game, then it definitely should not be worth it to you to work with them. In the event that they don’t pay the balance, at least you’ve got half your losses covered.
3. Don’t let clients go into debt. You don’t do anyone any favors by allowing them to continually accrue outstanding debt to you. You also have a responsibility to mitigate your damages. That’s why you see work-stoppage clauses in contracts that tell clients: No Pay-No Work. Immediately cease any further work until the client gets all outstanding payments to you in full.
4. Work with clients who can afford you. Clients who aren’t in profitable businesses or industries are going to more often be problem payers. It’s just a fact. No amount of wishful thinking is going to change that. Wish them well, but you have yourself to think about first. You can’t help more people (or stay in business long) if you are constantly trying to rescue folks who need to rescue themselves. You aren’t going to “save” them by taking on their responsibility or their lot in life. All you’re doing is enabling them while harming yourself. Save your energy for the clients who can easily pay. It’s really the healthiest, kindest thing you can do for yourself and the world.
5. Work with honorable people. The minute you see any inkling that a person is less than honest or ethical, run away. Fast. Don’t fool yourself into thinking you’ll be the one person in the world they would never do wrong. That is a fantasy. There will be a day they do it to you. It’s just a matter of time.
6. Perhaps rethink the whole project basis. Project work is grueling. You have to constantly chase down new projects, new customers, to survive. While you’re working on one project, your mind is thinking ahead to the next 10 you have to get to pay the rent. It puts you on a neverending hamster wheel of marketing and networking. And the administration you put into answering RFPs, conducting consultations, negotiating terms and contracts, invoicing… often it costs more and expends more time and energy than a project even earns!
Administrative Consultants who work with clients on an ongoing, continuous basis and charge upfront monthly retainers make more money and have much simpler businesses to run. They have better cashflow, less overhead and administration, and have to do way less marketing and networking once they’re established. There’s much more ease and continuity in the work and the client relationship, which, in turn, brings more ease and continuity into your business.
And there’s nothing that says you can’t also opt to take on intereresting or lucrative side projects that come along if you choose to, “choose” being the operative word. Retained Administrative Consultants have more choice in their business because they aren’t constantly scrambling for income and cashflow the way project workers must. Therefore, they get to pick and choose what they want to expend their energies on in terms of other opportunities that arise. They get to decide if a project is worth their time (i.e, is the money it will bring in worth the effort?). They don’t have to be distracted or have their energies divided or waylaid by nickel and dime work if they don’t choose to. Doesn’t that sound like a much nicer kind of circumstance and way to operate your business?
Great advice, Danielle! An ounce of prevention is worth more than a pound of cure.
Speaking of cures, it’s time to go after the @#$%^&*. Send him an email notice that you will not be able to continue working with him until after he’s paid you what he owes you. Then, cease and desist any and all work of his that you’ve got on the burner. I don’t care it it’s almost finished or if you’ve just started something for him, STOP.
If he calls about your work stoppage, stand firm or if you can’t stand firm, don’t take his calls. He Owes You Money — don’t go all wimpy — he’s in the wrong!
If he hasn’t paid you within a week of your work stoppage, send him another email. This time tell him that if he hasn’t paid you the full amount due by such and such a date, you’re going to start charging him interest on the full amount past due.
If the above hasn’t shaken him loose, after another week, send him an email telling him that you’re going to take him to small claims court to get what he owes you.
If all of the above hasn’t resulted in his paying you, then you have a couple of choices:
1. You can take him to small claims court.
2. You can place his account with a collections agency, or another VA who does collections.
Note, that all of the above will likely result in this client leaving you in a huff. From my personal point of view — Good Riddance! A client who doesn’t pay is worse than no clients at all.
I once chased a client for two years for $700 that he owed me (he did pay after small claims court found in my favor). Most entrepreneurs don’t feel that chasing deadbeat clients is worth their time and energy, and so, they let the matter drop. Again, it’s my personal opinion, but I feel that deadbeat clients keep skirting away from paying because they’re successful at getting away with it — because no one goes after them.
Yes, my process is unpleasant and leaves you with feeling like you’ve got a boulder in the pit of your stomach, but letting clients walk all over you is no way to operate your business. I don’t know about you, but I left the brick and mortar world because I was tired of people walking all over me.
I hope this helps. If this VA wants to talk to me about this, Danielle, please feel free to give her my contact information.
Excellent, excellent tips. I experienced this once, but it was actually with a retainer client! (You and I have spoken about this before.) The nerve of some; this guy had the audacity to ask me if I could please take care of XXX while he still hadn’t paid me. For three straight months, when his payment due date came around, I was chasing him, sending him messages, and he avoided payment at all costs, but still expected completed tasks on my end. Like clockwork, he always paid, but 10 days late.
The final straw came when he tried to re-negotiate our already negotiated rate and contract 5 days after the due date, (10 days after the beginning of the month, and 15 days after invoice was sent.) I billed him for the weeks worth of work completed and told him to take a hike. Surprisingly, he actually made good on the final payment.
Lesson here; you should be vetting your clients just as much, if not more as they are vetting you. They are not hiring you, and you are not hiring them. This is not a boss-employee relationship. You are both coming together to form a business relationship All potential clients wouldn’t think twice about checking your previous experiences and asking for other client testimonials. Neither should you. Get testimonials, and references from others who have done business with a client before you move into a business relationship with them.
Thank you Danielle for continuing to educate our industry! We are equals, not assistants!
Thanks to all you guys for headsup on this matter, great advise for a newbie, I can see clearly now.