Collecting on overdue invoices

[KarenB]

Hi All,

I haven't been here for a while (very busy) so I apologize for my absence. I need your advice!

I have a client in the US that owes me over $3,500 and is ignoring my repeated emails and phone calls. They have always paid before, so I was surprised at this turn of events. The invoices were due on receipt and were originally sent at the beginning of July.

I know that a month isn't a long time, but what concerns me the most is that they aren't responding at all. The project has been completed and all work delivered.

To further complicate things, I'm based in Canada, so I'm not sure if I'm going to have much luck.

Does anyone have any advice/tips as to what my next steps should be? Should I continue calling and emailing (politely, of course) or should I begin to sound a bit more harsh? I don't want to foster any negative feelings, but I do want to get paid.

Thanks in advance, guys!

Karen

[Spider]

First of all, weigh up the cost of pursuing this outstandiong payment - there's no point in spending $200 to collect $100.

What was the actual out-of-pocket cost to you to do this work for which you billed $3,500? If you spent $100 on materials and 30 hours of your time, non-payment will result in your losing $100 only, not $3,500 as some would have you think. To what lengths will you go to make back the $100? And could you more easily earn that $100 with a willing client rather than an unwilling client?

The more time you spend chasing outstanding bills, the less time you have to make money on other projects. Not to mention the anguish and unpleasantness associated with chasing nonpayments.

[KarenB]

Hi Frederick,

Thanks for your response. I never thought of my out-of-pocket expenses versus my time. I will have to take a look at that because most of the work was performed by my own team of subcontractors and I have paid them all in full. My profit margin is a percentage of that. Off the top of my head, I would guesstimate that about $3,000 would be out of pocket and the rest would have been my profit of $500.

I agree totally about the time and misery trying to collect when I could be working on other projects. It sucks!

Thanks again for your feedback. It has given me good food for thought.

Karen

[vangogh]

Hey Karen. Nice to see you, though sorry to hear about the non-payment. At some point it might be better to just cut your losses. However you said this client has always paid in the past so it could be a case of them not having the money at the moment. It's wrong for them to ignore your emails, but it's happened to me before and in the end the client usually pays. It's generally taken periodic emails from me to eventually get payment.

Your other options are to start stepping up the pressure. Talk to a collections agency or similar.

This won't help you now, but in the future always ask for a deposit (50&#37 up front and full payment before delivering files. The deposit helps sort out those who are planning on paying from those who aren't. And people who have paid 50% are going to want to pay the other 50% to receive the files.

[cbscreative]

Welcome back, Karen. Since you are talking about copywriting services, then you also have copyrights involved. I wouldn't bother pursuing this as an unpaid bill if it comes to that point, I would inform the client that an unpaid invoice means they have no legal right to use the copy. This is the last step though. If they're simply having cash flow issues, I'd do everything possible to work with them. Be completely sure they are trying to stiff you before bringing up the issue of copyright infringement if they use something they did not pay for.

It does complicate things that they do not respond to your emails. I would still use language to emphasize the importance of communicating why the invoice is unpaid. You can't help if you don't know the reason. The longer it goes on without them responding, the more it forces you to assume they're trying to duck responsibility. At some point, you need to turn up the heat before just giving up. If you do reach the point where you need to give up, I would be sure to include language about copyright infringement in the final email.

[KarenB]

Hey Karen. Nice to see you, though sorry to hear about the non-payment. At some point it might be better to just cut your losses. However you said this client has always paid in the past so it could be a case of them not having the money at the moment. It's wrong for them to ignore your emails, but it's happened to me before and in the end the client usually pays. It's generally taken periodic emails from me to eventually get payment.

Your other options are to start stepping up the pressure. Talk to a collections agency or similar.

This won't help you now, but in the future always ask for a deposit (50&#37 up front and full payment before delivering files. The deposit helps sort out those who are planning on paying from those who aren't. And people who have paid 50% are going to want to pay the other 50% to receive the files.

Thanks Steve,

Yes, this is a business lesson learned the hard way. No matter how reputable the client, situations can go south very quickly, even among the best customers.

I will continue my campaign of constant reminders and keep my fingers crossed. Since the work is transcription, it's not always feasible to give them some of it now and some of it later. It's pretty much all or nothing.

This client was referred to me by another top-notch client. One person advised me that I should let my top-notch client know that his referral was not paying, but that seems so unprofessional to me. I'm not into the 'name and shame' game. That would reduce my professionalism and I don't want to go there.

Karen

[KarenB]

Hi Steve,

Thanks for the welcome back!

I'm not doing copywriting for this client. I'm doing transcription, so it's a pretty straightforward service. I don't really have the leverage of copyright infringement in this case, but your advice is very sound in that regard.

I will continue on my modest path for now and let you know what transpires!

Thanks again,

Karen

[cbscreative]

I just reread the posts above mine and I'm not sure what led me to believe you were talking about writing. It only mentions "project" and doesn't say writing at all. Maybe I was still in the wrong thread mode and hadn't finished my coffee, or multi-tasking too much, I don't know.

[vangogh]

it's not always feasible to give them some of it now and some of it later. It's pretty much all or nothing.

I don't think you have to split up delivery of the work. It's the charge you break up. When someone agrees to have me design a site I require a deposit (usually 50&#37 before starting any work. I find that anyone who's legit is going to agree and those that refuse a deposit are the people who were going to have problems paying in the end.

Many services based business will do similar. Some even require full payment up front if the total price is below some amount.

You take the deposit, do the work, and then require the remainder of the payment before delivering the work or after delivering. Worst case for either party is being out half the money instead of all of it. It the project is one that has deliverables along the way you can adjust the deposit. For example with a new site I could charge a third up front, a third once the client agrees to the visual design, and the last third once the site is built. That way both parties are less at risk at any point along the project. The client is always at risk at first after deposit and before work begins and the service provider is at risk at the end after the work is done and before full payment.

Neither though is every at risk for all the money.

[Spider]

The matter of risk in business transactions is an interesting one.

Regarding payment (or part-payment) up front: One or other of the parties has to trust the other. Either the seller has to trust that the buyer will pay, or the buyer has to trust that the seller will send the goods and that the goods are satisfactory. Who has the greater risk? If the seller does not know the buyer, why should the seller trust a complete stranger? If the buyer does not know the seller, why should the buyer trust a complete stranger?

I think that

I find that anyone who's legit is going to agree and those that refuse a deposit are the people who were going to have problems paying in the end.

is a completely unfounded statement in the greater scheme of things. There will be some buyers who don't pay, just as there will be some sellers that don't deliver. That is the nature of business, although - let's be honest - quite rare.)

So, if we know that it could happen, and sometimes does happen, what can we do to with this information? We can qualify our prospects as best we can with a series of questions that will reveal, as best they can, that this person has a genuine need for the product, is prepared to pay for it, has the means to pay and also has the authority to pay.

We can also go out of our way to assure the buyer that we will honor the deal, by mentioning a little about how quickly we delivered a particulr product to a specific client, or how we went out of our way to deliver exactly what a specific client wanted, and so on.

Thirdly, we can use the risk as a great selling point - by accepting the risk and making the order risk-free for the client - "Try it for 30 days and then pay me or send it back."

If you are in business, and you want your business to grow, you have to go out on a limb. Anyone can sit back and say, "I'm not going to do any work until I'm paid first." Sure you'll get work, especially if you can build a reputation. But now you are relying on people who have heard of you before. Because to someone who hasn't heard of you, you have no reputation!

Qualify your prospects, accept the risk, set aside some percentage for bad debts, and grow your business. Or, distrust everyone and stay small.