Believe it or not, some clients will hire you with no intention of paying
for services rendered. Learn some options of what you can do when this
happens, and how to avoid it in the first place.
What’s better than steady work? Steady, timely pay. As my esteemed
colleague noted in
some clients can take an eternity to pay for services rendered. That’s bad
enough. What’s worse is when clients are outright dishonest and don’t pay
at all.
Just as there are people who duck out of restaurants or taxis without
paying, there are clients who bring in a freelancer to do pro bono work –
but don’t mention that up front. These deadbeats realize you’re a one- or
two-person business, and reason you have neither the time nor resources to
force them to pay up. If the amount is small enough, they also count on
you giving up without a fight. This is especially easy for short-term,
off-site, and/or fixed-rate jobs in which your invoices arrive long after
you’ve lost face-to-face contact with the client.
The First Steps
First things first: stay calm and businesslike. Don’t do anything that
would get you in trouble. The police take threats of violence very
seriously, and they won’t grant you leniency because someone owes you
money.
Next, try a few extra phone calls, faxes, and registered-mail
letters to “remind” your client that they are past-due on the invoice.
(Document all such activity, just in case this goes to a higher authority.)
Have colleagues, posing as members of your firm, call on your behalf. If
the client thinks you’re more than just a one-horse shop, they may rethink
their original position and pay up.
Extra Muscle
For the real tough cases, you have to call in outside help. What you do
depends on how much money is involved:
For really small amounts, you may just have to write it off. The client
clearly isn’t going to pay, and hunting them down can prevent you from
earning money with other clients. Set a deadline for yourself early on
and, if the client doesn’t budge, you have to swallow your pride and move
on. You can warn your fellow freelancers about the client but that’s about
it. (Be careful how you do this; speak with your attorney so you don’t get
sued.)
For mid-range amounts, call a collection agency. These companies charge
for their services, understandably, so you have to make sure you don’t burn
your profits putting them to work.
For large amounts under dispute, it may be time to call your friend,
Baring your legal muscle shows the other side you’re serious about getting
your due. If your client is also a small business, they may be reasonbly
intimidated by a letter or two on legal stationery, because they realize
costly litigation may follow.
The drawback here is that even a short letter from your attorney costs you
money. For it to be worth your time to go to court over the disputed pay,
you can quickly run up four- or five-figure legal bills. Whatever the
cost, it’s more money than you were planning to spend. (Really, isn’t this
the part where you’re supposed to get paid?)
The Best Defense…
You can’t always avoid these situations, but it pays to spot them ahead of
time and steer clear altogether. You can also position yourself so you’re
not at a complete loss when a client pulls the dine’n'dash.
Get the client to pay some fraction of the total project cost up-front,
plus regular payments throughout the expected project duration. If they
balk, you walk. Unwillingness to pay in advance doesn’t necessarily mean
they’re dishonest; but you can’t take the risk that they are.
Along those same lines, avoid anything that looks too dodgy. What’s that
parable about the little girl and the snake? Be especially wary of clients
that want you to work but are unwilling to sign anything. (I once had a
potential client tell me, “This job’s too small for a contract.” Right.
Then it’s too small a job for me, too.) It sometimes helps to get a nod
from a trusted resource.
If the deadbeat is a middleman such as a recruiter, you may be able to have
a closed-door session with the site client — that is, the people who pay
the recruiter — and let them know you’re being squeezed. You may be able
to work out alternatives, or at least let your client understand why you
have to leave. (If you’re not getting paid, why are you working in the
first place?) Please note that this is for extreme cases of billing
delinquency and should be used with care.
Hopefully, your experiences with deadbeat clients will be few and far
between. When you finally encounter one, these suggestions should help you
avoid a sticky situation.