When you're trying to collect money you are owed from a client, it's a good idea to start with a light touch and move to more forceful methods if needed.
Clients might have any number of reasons for not paying you. They might be forgetful, disorganized, short-staffed, or pre-occupied; or they might be facing financial difficulties or have other material reasons for non-payment. For example, they might be unhappy with the work delivered or disagree about the pricing.
By following the incremental steps below, you can expose the reasons you haven't been paid, design an appropriate response, and collect the money you are owed.
If you've done a good job setting up your work agreement (more on that below), your invoice includes a due date for payment. If you haven't been paid by that date, promptly send a friendly reminder email to your customer.
Your email can say, "Have you forgotten? Your payment is now due. I'd appreciate your prompt attention to this matter."
If your reminder doesn't get results, make your request personal. A phone call or a visit to your client will underline the urgency of your request, and it can help you gather information about what's behind the non-payment. If it's a simple oversight, the call might be all you need to get paid. If the reason is more serious—the company is having financial difficulties, for instance—you might be able to negotiate a resolution, such as setting up a payment plan.
When your recalcitrant client is a business with levels of management and control, begin going up the chain. If the person who engaged your services doesn't respond or isn't helpful, contact the billing or accounts payable department. If that proves futile, consider contacting the chief financial officer or the president of the company.
Of course, you won't have these options when your client is a solo operator, and you'll have to decide how many contact attempts are enough before moving to step three.
If a week passes after your call and you still haven't been paid, it's time to take more formal measures. (You might consider moving up the timetable if you are working with a new client, or pushing it back if it's a client you've worked with previously or a corporation with lots of levels of approval.)
A debt collection letter includes the date payment was due, a demand to remit payment within a specific time frame (typically two weeks); a list of acceptable payment methods; and a statement of the action you'll take if you don't receive payment by that date.
How strongly you word your statement depends on the time that's elapsed, the amount you are owed, and your interest in continuing to work with the client in the future.
You might use a vague phrase, like, "Please pay this amount now to avoid further action;" or take a more forceful approach by saying you'll refer the matter to a collection agency or initiate legal action.
A final demand letter isn't much different from a debt collection letter, but it is more formal and includes more detail about the action you will take if you don't receive your money. If you end up filing a lawsuit, you'll need to show that you sent a final demand letter to recover what you're owed. (See the All Law article, How to Use a Lawsuit to Get Paid.)
Your letter should include:
Following the outline above, you can write a perfectly complete final demand letter yourself. However, consider hiring an attorney to write the letter for you. The fact is, a letter written on a lawyer's letterhead, with all that suggests, is going to have a better impact than one written by a frustrated vendor. Look at it this way: The cost of a letter that gets the job done will be considerably less than the cost to have an attorney represent you in a lawsuit if your own letter doesn't result in payment.
Hiring an attorney to write a demand letter won't obligate you to retain the attorney if you do move forward with a lawsuit, unless you agree otherwise.
Chasing after a client for money you are owed doesn't have to be adversarial, and if you keep your communications straightforward and professional you can avoid damaging your relationship.
Here are some do's and don'ts to follow:
Do Promptly Follow Up on Unpaid Invoices. If the contract or assignment between you and the client calls for sending invoices monthly, don't wait for the next month and hope that the client will catch up. It's easier to collect a smaller debt than a larger one, so don't let the amount owed grow larger than it needs to be.
Do Be Professional. Keep your contacts and communications free of judgment and stick to the facts.
Don't Continue Working. When your assignment is ongoing, and your client has missed a payment, stop submitting work until you receive payment. Sometimes the act of pausing work will be enough to get you paid.
From the outset, you can avoid problems collecting what you are owed by clearly outlining how and when you should be paid before you begin an assignment.
Before you agree to take an assignment, discuss your fees, invoicing procedures, and payment due dates; and document your agreement in a written service agreement (a type of contract that outlines the work, fees, and terms you and your client agree upon). Some of the items to consider include: