Whether you’re an independent freelancer or a small business owner with 20 employees, it’s inevitable that you’ll face the difficult issue of a client owing you money. When a client stops paying you, you are stuck: doing more work for the client isn’t going to pay your expenses, stopping work can leave a project or agreement unfinished, and their excuses start to pile up. Or even worse—the client just drops off the face of the earth and stops responding to emails, calls, and billing reminders. What can you do when a client won’t pay you?
The Best Offense Is a Good Defense
Before you work with any client, make sure you have a payment policy in place and that the client agrees to it. Be direct about billing cycles, payment types accepted, and time the client has to pay after an invoice is sent. Thirty days is a good standard. Try using online invoicing and billing services, like Freshbooks or Sighted. These will make it easy to create and send invoices fast and have all your records in one place.
Document, Document, Document
Make sure you document your attempts to collect payment. Maintain good records on dates invoices were sent, any phone calls you’ve had with the client regarding their payment, and copies of emails or hard copies of letters you’ve sent. Sometimes it’s as simple as the client has a new credit card and just forgot to update you with their new information, so a simple overdue notice will suffice. When your client still doesn’t pay what they owe despite an overdue notice, you may decide to end your business relationship with the nonpaying client.
Plan for a Clean Break
It’s not easy to end a business relationship with a client. Your client may rely on your work to keep their business afloat. They may be facing some personal financial crisis and project their stress onto you. Either way, when terminating a business relationship with a nonpaying client, it’s important that you make the break clean and remain professional in your communication.
Before you make the call to fire your client, prepare a respectful yet firm email indicating that you are no longer able to work with the client due to nonpayment. Attach an account statement showing past payments, overdue invoices, and total owed. DON’T SEND IT YET. Save it as a draft, then call your client or, if they are a major client or owe a large sum, schedule an in-person meeting. Tell them out loud that you have to stop working with them and let them know what to expect from you going forward. After your phone call, send the email for documentation. Make sure to add the text “Per our discussion today…” along with important details in the conversation.
What Not to Do When Firing a Client
Don’t breach any contract you have with the client and don’t owe work that the client has paid for. Don’t be deceptive, unethical, or misleading in your communication. Don’t assume it’s more convenient to write them off than it is to collect what is owed to you.
How to Collect the Money Your Client Owes You
Last but definitely not least, you’ll need to collect that debt. You did the work, supplied the goods, and met your end of the agreement, after all. While some people try filing in small claims court, the paperwork and red tape headache (not to mention the hours and hours of time required to do it right) are too much. Working with a collection agency is a convenient way to collect client debt owed, even after terminating your business relationship with a nonpaying client. A collection agency takes care of all the paperwork and phone calls to collect for you so you can focus on those wonderful clients who appreciate and pay for your work.
Once you’ve decided to fire a client for not paying you, you can still collect debt owed and keep your business running smoothly by ending your business relationship with the client and avoiding stress by working with a collection agency like Atlas Financial Services.