Dealing with non-paying client


This post is a couple years old. I still have no resolution and am waiting for a day in court. If you proceed down this route, be warned that it likely will be slow for you as well.

Also, these sorts of issues will be dealt with at – grab your ticket today :)

Original post

I currently find myself with a client who owes a substantial amount of money (over $8000) and I’m at a bit of a loss over how to approach collecting on this debt.  Emails and phone calls have not worked so far.  This was billed over two invoices, and the first invoice is now five weeks past due.

Interestingly, 3 weeks ago when I sent an initial inquiry (2 weeks over due) I was told that the client had never recieved the first invoice.  Sounded convincing enough, but I had a return email from him on May 22 in which he’d acknowledged receiving the first invoice, with instructions to only email it to him in the future, instead of his CC’ing someone else as well.  So there’s some trail of evidence that this wasn’t completely ‘lost’ or ‘never recieved’.  At the same time, there was *a lot* going on on the project at that time, right before Memorial Day weekend, and we were trying to do a project launch.  Someone else at the client’s company had quit right around that time as well, so I was giving the benefit of the doubt.

I followed up with an email, which inquired about the invoices status.  I was told the client was ‘waiting on some checks to come in. Hopefully late this week, but more likely mid next week’.  I wasn’t sure if he meant that he’d send a payment the middle of the following week, or if he expected those checks in the middle of the following week.  Whichever was intended, I still haven’t seen payment yet.

I’m reviewing options here, and none look pretty.

1.  File a small claims court claim.  There’s a limit of $5000 on this, so already I’m losing out.

2.  Hire a NY attorney to file a larger claim.  This will likely be expensive.  (I’m in NC and the client is in NY, making it more complicated still).

3.  Hire a collections agency – this doesn’t seem like the right option, but it’s on the list.

4.  Forget about it.

#4 is the least attractive, which probably goes without saying.

I’ve considered a ‘name and shame’ approach – naming the particular client in question – but I don’t think at this point that will do anything positive except make me feel good.  I have our original contract which called for payment within 21 days (3 weeks) unless the work was noted to be unsatisfactory.  Bad clause in there, and the whole agreement was very one-sided, but I signed up for it, so I’m stuck with it.  In the 2 months of working with this client, I had no written or verbal indication that my work was unsatisfactory, so I don’t think there’s a leg to stand on there.  I’ve not yet sent a ‘final’ letter via certified mail yet, which I believe would be a good next step to take to document my efforts thus far.

The topic of collections is covered in my book, and was based on some previous experience and that of some colleagues of mine over the years, but I’ve never experienced it this personally before.  I will need to take my own advice next time and require some form of down payment for most future projects of any substantial size.

I’ve been on both sides of this situation – not being able to pay someone, and not being paid.  I’ve never had a client not pay this much though.  The one previous non-payment was for a few hundred dollars, and it was something we worked out over a phone call (not really a big deal).

What would be your advice in this situation?  If you’ve been in this situation before, how did you handle it?

For anyone wondering, this was not something that dragged on for months – this all happened within 2 months, but about 95% of the work was carried out over a 6 week project.  Perhaps invoicing weekly would have helped bring this to a head earlier???

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  1. A previous company I worked for worked on a flat sum bid system, so I don’t know if this would apply to you or not, but they used this policy on most of their projects: half up front, half upon completion of the project. That gave both sides incentive to see the project through to completion. I think they used smaller divisions in some instances, like a third up front, a third mid-way through, and the last third upon completion.

  2. You missed an option that I usually see missing from such lists: rolling up on in there. It’s usually left off because it’s uncomfortable. However, a quick note saying that you’ll be in the neighborhood on Thursday(or whatever) and you’d be happy to stop by for payment.

    You’d be surprised how often that’s as far as you need to go. In those cases where it’s not enough, following through has ALWAYS worked for me (for bigger amounts than you’re talking about).

    You can be completely cheerful about it, but showing up in at their door and asking to speak to the person in charge of Accounts Receivable is unbelievably effective.

    I don’t think anyone should consider legal action until this has actually been done. At first, it seems really confrontational, but it’s nothing compared to filing a lawsuit.

    Besides, it doesn’t impose any extra costs or forking over a percentage.

  3. Approach them, face to face, with a payment plan or schedule.

    Smaller amounts spread over time are easier to deal with, and if they agree to pay the first, it’s easier to heckle them into paying the second.

  4. Hey guys:

    Good ideas, but I’m about 5 states away. Not saying it’s not possible, but it’s not as easy as just popping down the street, or even city. It’d be probably a $400 round trip airfare, plus another $50-100 for taxis/transport. Plus that’s non-work/billable time – at least 8 hours. So even this route ends up being rather pricey, though not as much as utilizing a bill collector. I’m so torn on this, but the client is not making it easy – not returning calls or emails. He’s basically avoiding me.

    FWIW I did offer some payment plan options today in an email, but so far have no response.

    Thanks for the feedback and ideas so far y’all!

  5. In the future: Calculate your price before signing a contract. Plan for your normal pay period, say two months. Add interest for to cover two months to your price. THIS is now THE price of the job. If they want to pay over a longer period, calculate additional interest. If they are willing to pay up front, offer a discount (equal to the interest).

    Basically, you are not a bank, and you are most certainly not THEIR bank. If they pay on your normal terms, then they have negotiated the price with you – if they want to hold on to their money longer before you get paid, they must pay interest. If they’re willing to pay up front, they can get a deal. You’ll be surprised how many will pay up front to get this “discount”.

    Never start a job without at least a third down. As a working professional, you have operating expenses to meet. If they’re not willing to acknowledge that, they’re probably going to be difficult.

    For your current issue, it sounds like their problem, like most small businesses, is poor management of their cashflow. It is unlikely that it is their standard practice to cheat contractors, they just have other debtors with bigger teeth. If they could, they probably would pay their bill, so try to make it easy for them to do that.

    If you can afford to do it, offer them payment terms over a month or two, to make paying you a smaller chunk to swallow over time (I would definitely include interest in this offer). If they can pay small portions every few weeks rather than two lump invoices, they could work it more easily into a budget.

    Spell it out to them that you are willing to work with them to keep their record clean while being paid what you are owed.

    If they are difficult, I would do the paperwork to set up the small claims case, then let the customer know via a registered letter BEFORE you submit it and offer to let them meet their obligation to you before the issue becomes “a matter of public record” (see if they have a Better Business Bureau record OR better yet, a Dun & Bradstreet rating that might be put at risk by this. If so, mention it as subtly as you can). Again, offer payments if you can, but don’t cut the amount they owe you, just offer a little more time.

  6. The advice I’ve seen is to give the client the benefit of the doubt that they did not receive the invoice (in spite of the evidence of email receipt). But only allow them to use this excuse only once. Switch to a verifiable communication channel for all further invoices.

    One important thing to do now is to keep very thorough records of communications, both dates and what was said, in case you need to go to court. Start your notes right now while the actual work is fresh in your memory, write down the dates you worked and how many hours, etc.

    Resend the invoice to the client, in a registered letter. Write “INVOICE” in big red letters on the outside of the envelope. Given that there is a disagreement about whether the first invoice was received or not, offer to compromise, and allow the 21 days to start now, from receipt of the registered letter. Be clear about the payment due date.

    You can also appeal to them on a more human level. Talk to them on the phone or in person and say something like: “Look, we had a deal for you to pay me for this work I did for you. I’m getting the feeling that you aren’t holding up your end of that deal. I need to know when you will pay this invoice.” (Don’t say IF, as though it’s a possibility for them not to pay it; say WHEN.)

    If necessary, like if they make more excuses and won’t commit to a date by which they can pay, you can compromise further, allowing them to pay you in installments. Ask them to pay some significant amount immediately (suggest 50%), and ask them to sign a statement committing to make regular payments for the balance. Then you’ll probably need to follow up each month and remind them.

    Maybe that way you can get the balance down to a level that can be taken to small claims court. But don’t get your hopes up with court. Even if you get a ruling in your favor, it may be hard to enforce.

    It’s very annoying, but in the long run, $8K is probably not going to ruin you. Lots of freelancers have to deal with clients who renege on payment on that magnitude. I had a $6K invoice go unpaid a few years ago. Definitely don’t do work for this client again unless he puts the money up front.

    You should probably also make a note to yourself to double-check that you receive correct 1099 forms from this client next January.

  7. person of interest

    I know someone who knew someone who had just this problem. They logged into the database and turned a primary key id column into an int(4) then waited until the client called them about records not saving and they were losing money. BTW “I see there are some invoices that remain unpaid”…. ;) Note that I’m not condoning this behaviour….

  8. Any chance you can withhold the work you did for them? E.g. if it’s a site you did, do you have access to it and can you take it down? I’m not saying you should do that immediately but you can send them a letter stating that payment is overdue and if they’re not going to pay, you’ll take it down.

    Also, I think 5 weeks is a bus soon to go to court. Most likely there’s a reason they’re hesitating, perhaps they have cashflow problems. If you talk to them, try to find out if that’s the case and offer to help with for example monthly payments instead of everything at once.

  9. I agree that 5 weeks is too soon. I’ve had one client not paying up (smaller amount, about 1000 euro which equals perhaps $600-$700). Rather annoying, and it never got paid. I did put a collections agency on it after about 6 months, but he kept throwing excuses and weird stuff into the discussion, even with the collections agency. Then it was a choice for me: got to court with only a chance of winning (and losing would set me back another 500-1000 euro in legal costs) or let it be. I left it at that.

    For $8k, I would probably take the chance though. That’s a bigger sum, too big to just let it be (imho).

  10. I always make sure I control the project (say a website) and I don’t hand over the logins until I’m paid.

    That way if they don’t pay me, I turn the website off until they do.

  11. Send him yet another invoice, this time accompanied by a legal sounding “OR ELSE” letter (maybe have a lawyer draft that one for you). Those have more effect than you’d think.

    Good luck!

  12. Do a security audit on the work you have just done.
    You won’t collect your money, but you will improve your skills, the quality of your work, and still have a little pleasure when a script kiddie find the playground…

  13. Hi,

    if possible, visit the customer PERSONALLY. Prepare some sheets of paper, where the customer has to sign that the project is completed without any problems or he has to name the problems so you can rework them.

    Also bring a copy of the invoices and let him sign that he has received them and that they are overdue.

    As a last paper, prepare something like a payment agreement, where you both can fill in the way how and when the invoices will be payed. A better way would be to insinst to receive a cheque directly. If he cannot pay, ask for 3 (or 4 or 5) cheques with smaller amounts, and agree to cash them at agreed dates. In germany, when the customer gives you a cheque to pay an invoice, this is a “promise to pay” and if the cheque is not cashed, you can go directly to the court.

    Most important is to show up there personally. If this doesn’t work, call different numbers of his employees every day and ask, when you can expect payment…

    Please excuse my english – and maybe some words may be not correct in this context…


  14. … and by the way: never (!) forget about money you have earned! It is yours! There are a lot of people out there trying it exactly this way. “Make it hard enough to get the money and you won’t have to pay”.

  15. I think as a freelancer you sometimes get on a problem like that,
    don´t know about the procedure in the US.
    I Would send a reminder and try to call them like every few days what about the invoice. You can feel if they just have excuses tell them you would like to fix it on the normal way without getting to court and that stuff. If you can´t get the whole sum at once try to get pieces.
    At least 4000$ in your hand and 4000$ you have to get are more than 8000$ you have to get. If you feel like the company might have gone bankrupt act fast before there´s nothing left for you.

    btw. “about 1000 euro which equals perhaps $600-$700″
    1000EUR is about 1600USD, 1EUR = 1,592 USD so you have to calculate EUR * EUR/USD change rate.

  16. For a large part I Agree with Bill: just keep at it and be very, very patient.
    Hang in there, try to stay friendly and appeal to their humane side (supposing they have one). Maybe by asking them things like how they’d feel when their paycheck was withheld for two months. If that wouldn’t put them in a bit of financial trouble. I’ve found that most of the time people who receive those monthly payments have no idea what it’s like not getting payed a sum like $8000.

    It does help if you try to talk to them over the phone: an email can be ignored way to easily and especially if you start explaining some financial predicament on your side they’ll most likely be more sympathetic and inclined to help out.

    I also agree with Ivo that it helps if you have something to bargain with. Don’t go threatening just yet but just think of it as a reassurance of some kind. If I read correctly, you do have a contract with this client, which presumably also states the amount to be paid, so I guess you have another reassurrance that at least they will have to pay you. Just be very, very patient.

    From what I understand they are not saying your work is unsatisfactory, but it’s something you’ve thought up as a possible explanation?
    I know it’s hard not to think of some devious plan behind it all, especially when they are really fuzzy about “not receiving” invoices and so forth, but most likely it’s just down to sloppiness, a chaotic mindset, maybe indeed cahsflow problems and a total lack of understanding for your part of the deal. In my 8 years as a self-employed developer I’ve yet to meet a client that deliberately was “out to get me”.
    Having said that: I did have to wait 4 months once before getting paid a considerable sum (> $8000) and I also did despair.

  17. A critical “bug” would probably activate the client and maybe give you the money immediately but this would also give him a chance to complain that your product dond work!

  18. I agree with the “talk before suing” advice (talk as in voice/face-to-face, not email/IM). If he’s not playing ball then go above him and talk to someone higher up the organisation.

    Here in the UK, it’s important to collect evidence that proves that the client is not actually disputing the invoice. If the client isn’t disputing the invoice and is simply not paying, then it strengthens your position if you need to take legal action. When I chase a late invoices I always make sure I have records of the client saying things like, “I’m waiting on some checks to come in” or “we should be paying you next week” – they’re the proof that the client has accepted the invoice.

  19. One thing I’d neglected to mention (there are a few things – I don’t want this client to become easily identifiable) is that I’d done the ‘shut off’ thing, sort of.

    The situation is that I’d been brought in because of PHP. This client has worked for year in other tech, but didn’t have PHP skills on staff. *They* had a client who had PHP work, and they took the work on (“why?” is another question I don’t have an answer to!). This particular client dragged their feet paying *my* client, and refused to pay their last installment to my client after launch.

    At some point the “we don’t launch until you pay” “you don’t get paid until it’s launched” loggerhead becomes unbearable (for me anyway) and considering I hadn’t been paid *anything* at this point, was happy to just put it up to get it finished and then invoice. I suspect my client had a similar feeling toward *their* client, although they’d apparently been paid something during the process. The process had started before I’d joined the project, but the person doing the PHP wasn’t very good at it. Not that he was bad – good developer in other tech, just not used to making changes to someone else’s poorly written PHP.

    So, after accomodating the client’s client with numerous extra changes, we launched, and the client’s client still kept complaining. I had a list at some point of about 15 “issues”. *1* of which was actually caused by my coding – I’d missed something. The other 14 were “issues” about how to manage content in the system they’d already owned and run for a year.

    About a week after launch my client called me with his lawyer on the phone to walk through taking their new site offline, and putting up the old one, because my client hadn’t been paid. Our logins still worrked, so I did just that. His lawyer had suggested going further and just taking the new one down, and not worry about putting the old one back up, but he and I both felt that was overly antagonistic. By that point, however, they’d brought on someone else who then locked us out and put up the new site from backups.

    My client and *his* client are both in the same city, so for them to do face-to-face and work out payment should be possible, but they’ve not been able to come to terms on their final payment (as far as I understand). While sympathetic, it’s ultimately not my problem, and I need to take further steps to collect on this.

    I had an interesting story from a friend yesterday about his collection efforts. Back in 1998 he had to collect from someone who wouldn’t pay. He went to court, she didn’t show up, and he had a judgement against her. 6 years later he got a check in the mail from out of the blue. The judgement had gone against something of hers (house, maybe?) and she had to pay the judgement to get clear title before finalizing a sale. This taught me that going the legal route might work, but might also take years.

    Again, thanks to everyone for their input and suggestions. Not all of these will necessarily help me in this particular situation, but will no doubt serve as warnings for others.

  20. Had some other conflicting counsel from people.

    A) Wife suggested ‘name and shame’ campaign.
    B) Friend suggested to not do that, or wait much longer till other options have been exhausted.

    Reasoning for A was “it’ll make you feel good”.

    Reasoning for B was that it’d make *me* look less professional. I’m not 100% sure of that. Given the dozens (hundreds) of projects over the years, I’ve never publicly posted a negative note about any of the clients or projects. There’ve been a couple times when I’ve *wanted* to, but it was more just from a venting standpoint, not to rectify anything. If the treatment I’m getting is a habit or pattern this client has for dealing with all contractors, it’d be a heads up warning to others, even if I can’t get paid myself. I’m still not 100% convinved this is the case. I’m probably giving too much ‘benefit of the doubt here’, but I get enough contact to keep me going.

    In any case, we’re supposed to talk on the phone today – we’ll see what happens there.

    Thanks again.

  21. 1. Use the court option, as it seems the cheapest for you.
    2. learn for the future:

    – work with downpayments: as long as the customer has payd to much to not pay you allis good ;)
    – use secure mail options with a recied ;) (proove for court, no “the mail is lost story)
    – act as this behaviour is standard, be prepared. Keep enough money to fight it out.
    – let a professional handle your payment stuff, your customers are alays your customers, never in any ways your friends. These 10-15% cost is worth all the money. In worst case you have all the docs together to go to court asap.
    Additionally you safe time for tax stuff. All the docs are in good shape when it comes to taxes.
    – never work with custom,ers that make payment problems twice.
    – never buy stories about: my client has to pay me, this is none of your business and will not pay your rent or buy your wife flowers.

    SIMPLY: Do it the 0 Tolerance way, there are excpetions, but it must be excpetions.

  22. Mike, whatever you do, don’t resort to the name and shame game. Take the higher road and use your normal legal channels to claim your money.

    As others said, in the future, take money up front and then at incremental times (monthly) or bi-weekly based on billable hours. The longer you wait to bill the longer it takes to know there is a problem.

    My $.02.

  23. Oh, you could also try sending them an invoice in a pink envelope like Comcast and Geico do when you are late on a payment. Not that I’ve ever been late, that’s just what I heard ;)

  24. I’d avoid the name and shame route. Once you take it it’s permanently recorded online and it’s no longer a threat, but an actual attack. It’s a good way to stiffen the client’s back into edging you towards the far side of that miracle schedule called an Aged Creditors Listing.

    I would definitely start recording all exchanges from this point forward and taking notes. If you haven’t been doing this, document previous exchanges before your memory fades.

    Most of all, be patient. If a client is having genuine cashflow problems they probably do have bigger creditors to worry about. They may also simply have a policy of pushing out creditor payments intentionally to manage their capital – it’s poor practice since they have signed a contract but it can happen. I also doubt they can wait this long to announce your work as being bad – most people would see that as a final act of desperation to escape paying up.

    If you can threaten their credit rating with a bad debt – that is leverage. Have you checked their credit rating if possible?

  25. I wouldn’t do name and shame. it *will* make you look less professional. even though clients won’t even consider not paying you, stuff like this will make you look bad and clients seriously considering you may feel they shouldn’t go for you because of a name and shame campaign.

    I’m not sure about the US, but here in the netherlands, you could try to do some cautious scanning of possible other business partners of their. People they hire for work. Here in the Netherlands, IIRC, it only needs two companies/freelancers that still get money from them to have the court freeze their bank accounts until they pay up, or even have them declared bankrupt (though really, you probably never get that far unless the company is actually really without any cash flow). So making a few cautious calls to freelancers you suspect might also be in business with them may be interesting.

    But keep in mind that 5 weeks is not a long period. Hell, big companies wait even longer as company policy, just to get some interest out of the money. Or, of course, because their internal workings are so slow that it simply takes that long to get through the whole administration.

  26. @all – name and shame isn’t on the cards right now, and there’s only a slim chance I’d ever go through with it.

    I was approach the other day by another contractor who’d done some work for the same client and also hasn’t been paid either, so it’s making me think it’s either a pattern or there’s some deeper issues going on there.

    @stefan – 5 weeks. I understand it’s not really that long a time, and I’ve certainly waited longer for some payments. Those orgs were much larger and had some up front expectations set (by them) that payment would take a while. One payment took 70 days – 10 weeks – and they apologized at that point, saying that was long even by their standards. In this situation it’s a smaller company who doesn’t have much bueaucracy.

    Continued thanks for the views and input from all of you.

  27. Post a a invoice ;)

  28. @carlos – thanks. That’s probably the best suggestion I’ve had yet – at least one that made me laugh about the whole thing a bit :)

  29. send the registerd letter with a last and final due date, then explain you will put a lean against the company which means they cant sell or make money untill youre
    account is payed up, then if that fails put a lean on them

  30. FWIW – if the client has not flatly refused payment, I would say talk it out and perhaps work out a schedule for repayment BUT at the same time I would say stop further development.

    What we follow with new clients is a weekly billing cycle and only 1 week worth of code is handed over to the client, programming continues in the subsequent week but the code is hosted and demonstrated on one of our servers till the payment for the first week is cleared. As trust develops this cycle is increased to an optimal of monthly payment where in we give the client a 2 week credit and the client in turn gives us a 2 week advance

    Even big companies (read the biggest of them all) agree to your terms if you present it right – been there done that.

    Lastly I feel a three week wait for payment on a project which is a total of 6 weeks is absurdly long…

    Heck I should have done a blog post on this one ;)

  31. I have no firm resolution yet, but the client called today and offered to paypal the money. There’s a 5% hit on that off the top, but it’s certainly a better method than just about anything else. Now granted, none of this is a done deal, but to get a call directly to work this out was a huge positive step in this situation. His company has been hit some because one of his clients has not paid, and the ripple effect is affecting people like me. To his credit, he’s offered to pay this out of his own pocket via paypal. I’m trusting this will go through this evening, and I’ll update things here. I know it wasn’t *easy* for him to call and deal with this, and I was that much more impressed with the fact that he did it anyway. Still, actions/words/louder/etc, so we’ll see what happens, but it sounds positive so far.

    Continued thanks for everyone’s input.

  32. Thanks Mike – you’ve reminded me why I put up with the downsides of having a regular job. :-)

  33. Hope you got your money !?

    In your situation I’d get some legal counseling… i’d make it a whole lot easier to get your money.. and it also feels better not being totally screwed over.

    Anyway, in the future get some upfront payments.

  34. Update:

    I’ve sued this person, and in the last few weeks have heard horror stories from other people that this person has not paid either. I also found out someone else initiated a lawsuit against him just 3 days before I started working for this company. Should have done more homework there. :/

    I’m self representing right now (pro se) as I don’t have the money to bring an attorney on right now. However, if any kind attorneys out there would be willing to talk to me on a contingency basis or a low-fee basis, let me know. This is taking place in NYC.

    Will keep y’all posted.

  35. hey! How did it go? I have a client that owes me $4000 and same story, just found out he also took a lot of money from his own clients.

  36. I’m also currently dealing with a non paying client although luckily the amount is much less ($1200). I laughed when I read your blog because my client is using the same excuse of “waiting on a couple of checks to come in” … looks like dead beat minds think alike!

    It’s been 4 weeks since he told me that and every week it’s “not yet” so I just re-sent him the invoice by registered mail and included a note about taking him to small claims court if he doesn’t pay within a week. The only potential problem with small claims court is that his company is located in a different city (same state) but from what I understand small claims may be brought against corporations in the county the work was performed in so hopefully that will work out … obviously IANAL

    Please keep us updated on your court proceedings and good luck!

    View this video … you’ll laugh ;)

  37. definately tell them you are comming in to recieve your payment. Being there in person will make them cough up

  38. My current client (about to become ex-client) owes my company $70K+. Yes, that’s right, more than seventy-thousand dollars. It’s not for web work, it’s a verbal consulting agreement that we’ve had for years, and he’s finally hit bottom, lies to everyone and avoids me and 3 other companies (we all know each other) that his company owes. I would guesstimate he’s on the hook for something like half a million dollars. It will be a miracle if we are able to recover this… burning up here!

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