What to do when your client doesn’t pay?

Your never noticed that echo in your mailbox until a client’s check doesn’t arrive when it’s due, but you shrug it off and figure they must have just missed the mail. The next day you ask the carrier if it’s possible something was missed, and you look around on the ground to see if the envelope might have been dropped. You call your client, but they don’t answer, so you leave a message and follow it up with an e-mail. The sun sets and rises again without bringing any response. Like the grounds in your coffee mug, the bitter realization slowly settles in your mind that your client doesn’t intend to pay you any time soon, if at all.

What can you do? The answer depends heavily on what you’ve already done, or failed to do.

First, you should cease any further work for this client until payment is received, and tell them so. But that may not have enough bite, especially if you’ve just completed a project or if there’s any doubt about the value of your contributions. If you have a strong contract, you could get your lawyer to send a letter and threaten to sue. If you only have a verbal agreement, you may still be able to take legal action but that should be a last resort. Even if you’re successful, you haven’t really won. That’s like defining a good landing as any one you can walk away from.

What you want instead is for your client to pay you on their own volition, continue to be your client, and pay you on time in the future. Here are some things you can do to make that happen.

  • Start with a helpful attitude. Treat the nonpayment or late payment as a problem that must be solved together. It may have just been an oversight, so don’t jump the gun. But if it turns out that the client has a systemic issue with timely payment, then you may need to make some changes to help the client live up to their end of the agreement.
  • Offer a discount for early payment. With this strategy, your client can save money if they pay you very promptly — say, within 10 days after invoicing. But you must not give any ground on this. If the check arrives on day 11, it’s “no discount for you!” no matter what the excuse. Otherwise, they’ll gradually stretch you out until they’re taking the new discount on the old terms.
  • Change your terms to require payment in advance. The client buys so many hours at a time, and you let them know when they’re getting low. This doesn’t have to be presented as a punishment, either. You can offer the client a discount for paying in advance — and in this economy, many companies prick up their ears when they hear “discount.” I recently followed this advice to good effect with a client who had a history of late payment. My only mistake was not requiring a minimum purchase — now they’re constantly running out of hours, and I have to stop working until they send me more money. Once you establish this policy, the one thing you never want to do is to perform work before the money arrives.
  • A penalty for late payment. This is a common suggestion, but personally, I don’t like this one very much. First, it never seemed to work — the client treated the penalty as a reasonable interest rate on a loan I never meant to give them. Second, the penalty legitimized the late payment, which therefore became even later. Third, punishing your client can’t improve your relationship.

It’s possible that your client is voting with their checkbook on the quality of your work. That’s not a very effective or ethical approach to a performance review, but I’ve seen it happen. In that case, you need to do two things immediately:

  • Make it absolutely clear that you expect and desire open communication about any dissatisfaction with your work and that violating the terms of your contract is not an acceptable form of communication.
  • Fix the problem — provided that they’ll let you fix it and that they’ll pay you on schedule thereafter. Clearly define what the problem is and what will constitute a resolution.

This brings us to the single most important thing you can do to insure timely payment: provide great value for your fee. Your client should have a good reason for wanting to keep you happy, so they don’t risk losing your services by withholding or delaying payment. I won’t pretend that your contributions will automatically be recognized — some people and organizations just don’t get it. But if you consistently create a superior value proposition, you will eventually attract more appreciative clients. Then you can afford to kiss the deadbeats goodbye.