Customer Management – How to Handle Late and Non-Paying Customers
It’s by far one of the worst feelings in the world when you’ve worked so hard on a project, sent your client an invoice, and suddenly they disappear.
You often start thinking: “Are they trying to stiff me? Maybe they’re just out of town.. They’re not trying to ignore me.. Are they? I do not want to deal with this”
Not being paid for your time and effort is a hard pill to swallow and it’s something that has been plaguing the freelancing industry for years now. Part of the problem is that federal employment laws often don’t keep up with the changing workforce and companies increasingly rely on freelancers for work.
One in every two freelancers in the US had trouble getting paid in 2014, while 71% of freelancers struggled just to be able to collect payment for their work at least once in their career. The Freelancers Union estimates that the average unpaid freelancer in the U.S. loses almost $6,000 annually – roughly 13% of their income.
While you often feel lost when a client is slow to pay or outright refuses to pay for your services, there are a few ways to mitigate this problem.
1. Proper documentation is key
There has always been some debate as to whether or not contracts are useful for small businesses. If you’re looking for a sure fire way to protect yourself and set clear expectations in your working relationship, a contract is the right solution for you.
A few key points to note when making a solid contract:
- Who is the contract between?
- What are their financial obligations for delivery and payment?
- Who will claim final ownership of the finished product? Will you keep some of the ownership or pass it off to the client 100%.
- What will happen in the event of a dispute?
When structuring a contract, be sure to verbally communicate your payment terms, invoicing schedule, deadlines and whether or not you charge a fee for late payments.
2. Hold to your commitments
Any obligations you’ve set in stone and agreed upon with your client should be kept. If you specify in your contract that you will be invoicing on a certain date, do not invoice on any other date.
Ninety percent of your clients aren’t purposely trying to get over on you. Sending a gentle reminder their payment is due can go a long way.
3. Multiple deposits aren’t a bad thing
An upfront deposit is tough to ask for but if you’re client believes you will provide them with a valuable service, they will surely consider. Most freelancers ask for a deposit before starting any work. If you have a working relationship with the client, consider only asking for 20-30% up front.
If you’re working with small clients, only ask for a small percentage up front. Don’t hesitate to ask for a second payment upon delivery of the initial completed prototype. Most consider it to be a good business ethic of customer management to follow up requesting a second payment for your work. This way, should the client decide not to pay at the end of your project, they will only owe a fraction of the project’s total cost.
It’s not the best scenario but it’s better than being out 100% of the total cost.
4. Organize and Invoice appropriately
If you’re not as organized as you would like to be, consider a third party program to help you with your invoicing. Quickbooks, FreeAgent, Less Accounting, Xero & Zoho are a few good software titles that can help you out.
Not only will they help you with customer management and help you look more professional with your invoicing, but they will also remind you when a payment is over.
A Friendly email reminder is a good way to stay on top of your consumers. There are hundreds of explanations as to why they may not be getting back to you. If you have already emailed the invoice to the customer and haven’t heard back, wait a few days and send another email to confirm they’ve received the invoice.
Upon receiving a response from your client in regards to them having received the invoice, follow up immediately after and reiterate your payment terms and list the payment period agreed upon.
6. When all else fails, improvise
Some developers have discussed the many benefits to implementing a CSS Kill Switch when dealing with clients who refuse to pay for their hard work. A CSS Kill Switch is an essential tool that lets developers blackout a website, even if the client has changed the passwords or tried to lock them out on the backend.
This may be a little controversial but make the client well aware in your contract that this is a potential repercussion should no payment be made after several months.
Keep in mind that more web-savvy clients can figure out how to disable the kill switch, so make sure you’re ready for any repercussions and potentially losing any leverage you previously had.
Be your own advocate
All in all, any freelancer should always work on creating long lasting relationships with their clients from the very beginning. This helps prevent slow and non-payment issues from ever arising.
Should you ever have to deal with a hostile client, don’t ever be afraid to be your own advocate. This is your time, your business and your skills that are being occupied by someone else. It’s vital that you have the confidence to stand up for yourself and communicate professionally that not being paid for your services is unacceptable.