Practical Steps to Prevent and Resolve Client Payment Issues

A client who does not pay, or is a serial late payer, has a negative impact on you and your business.  You put in the time and effort to deliver for your client and should be compensated accordingly.  Being ghosted after following up on payment, creates frustrations and emotional distress.  In this article, I will outline how to mitigate the likelihood of such a scenario and offer practical steps to resolve it.

Your client management starts before you even accept the engagement. Prepare with the three following recommendations:

Research
Conduct appropriate research to understand who your client is.  Just as your client is doing their due diligence to decide if you are the right person for the job, you should do the same. Use Google, LinkedIn or the Better Business Bureau to gain insights into the individual or entity.  Tap into your network, particularly if the client is local, to gain insight into their reputation and the merit of a potential working relationship.

Contract
While a formal contract is often not practical, you want to clearly define the scope of services you are hired for and how/when you are compensated.  The payment terms should reflect the payment policy, specify a late fee and include a dispute resolution.  The agreement should serve both you and the client by establishing a transparent relationship and clearly outlining each parties expectations.  A client reluctant to accept an agreement represents a big red flag.

Accounting Software
The invoicing feature of cloud-based accounting software can act as a key tool to help you manage your receivables.  Not only does it allow you to automate and standardize the invoicing process, but the functionality also expands to offer payment options to your client via credit card or bank transfer.  Be aware the fees differ across the software packages.

Even with the best preparation, you may still find yourself in the frustrating situation of your client ghosting you when it comes to payment.  First and foremost, as you are dealing with a sensitive situation, maintain a level of professionalism to avoid any other unintended consequences.  It goes without saying, do not make threats or disparaging comments.

Establish the Facts
It is important to clear your head and review the situation.  Take time to walk through the scenario to build up the case before you fire off an email or make a phone call.  Prepare yourself with the facts as the communication you are about to engage in is most likely of a serious and even tense tone.

Be Persistent
You are owed compensation for the services you rendered.  Do not be afraid to be persistent, yet maintain a professional approach, to get paid.  Mix up the communication mediums between email and over the phone.  If possible, elevate the matter internally at your client to his or her boss.

Document Everything
Make sure to document everything.  You will want to create a clear track record pertaining to the obligations you fulfilled as part of the agreement, the compensation you are entitled to and follow-ups to seek payment.

Signs of Dissatisfaction
A lack of payment from your client could potentially signal another issue, namely an unhappy client.  The client may “feel” you did not earn your fee for the services rendered.  Be direct and politely ask the client if they are happy with your services.  If not, analyze whether the issues are valid or not.  Your priority is to resolve the matter as best as possible and, of course, get paid.

Suspend your Services
If you experience payment issues while the project is still active, suspend your services and deliverables.  You will immediately get your client’s attention and force the payment issue.  However, recognize the tactic can negatively impact the working relationship with your client and should not be pursued prior to the previous three suggestions. 

Take Legal Action
Legal action can be expensive and time-consuming.  Legal fees can quickly escalate in excess of the outstanding payment you are looking to recover.  The threat of legal action can help resolve the matter quickly.  Arbitration clauses, if you agreed to in a contract, or small claims court are alternatives to a regular lawsuit.  A major risk of initiating legal action is the potential your client may file a countersuit against you.

When dealing with payment issues, it is critical to remain professional and objective throughout.  Recognize the sensitivity of the situation and the impact your communication can have on the recovery of the outstanding payment as well as future business opportunities.