Fees & Collecting | Home Office Warrior

When Clients Don’t Pay: Part III – Should I Hire Some Muscle?

Feb 05, 2009

In my last post, When Clients Don’t Pay: Part II – How to Get Paid without Hiring Muscle I outlined some steps to take that should help you get your cash. If your cupboard is still bare, then this post is for you.

I posed the question to my freelance people in my networks: Have you ever hired a collection agency or lawyer to get paid?

The most interesting answer I got was in the silence. I interpreted the cricket chirping to mean that taking the extra step into the formal collection process was either: A. not necessary or B. not worth the effort.

I did get an e-mail from a VA/CV who went to some extreme lengths to get her money, including swearing out a warrant for a wayward client’s arrest. She got paid after two years and felt that it was worth the effort.

That’s the real question, isn’t it? How much is the invoice amount worth to you in time?

I’m assuming that readers here equate time with money. Most consultants understand that conversion theory very well.

The question of worth is as individual as your business and the invoice amount. For an invoice of under $500, some consultants will write it off (did you know that you can claim some of those write-offs on your taxes?). On the flip side, a freelance copy editor might consider anything over $200 as something worth pursuing through an agency or attorney.

Is the cost of hiring a collection agency worth it based on the invoice amount? Some attorneys get 40% of what they collect. It’s one thing to be right in principle and get justice, but it’s something else to remain a profitable business. It’s you, the captain of your ship, who decides which is more important to you and has to act accordingly. If collecting is what will keep you afloat, then hiring an attorney may be your best course.

Life coach Shannon Wilkinson offered some sound advice as a first step before diving into collection agency waters. She suggests sending a demand letter to the client and cc’ing an attorney. That way, the client gets the impression that you mean to collect (you’re not joking) and that you have somebody backing you up. It doesn’t cost you any fees since you’re not involving the attorney at that point.

Some clients will pay without any further hassle.

Speaking of hassle, here’s something you want to avoid: harassment.

There are laws against harassment and they vary by state. It’s in your best interest to find out what those laws are and understand them before going to the mattresses.

You might think that a collection agency works to represent you in the best way while attempting to collect client debt. You would be wrong.

If you decide that an agency is the best thing for you, be choosy about who you hire. Even large agencies break the rules and can make you look bad. Here are some links with great insights on the ins and outs of collection agencies:

http://rubyhoneymarketing.blogspot.com/2008/07/hiring-right-collections-agency-for.html

http://hubpages.com/hub/clientpay

http://www.fastupfront.com/business-articles/accounts-receivables/using-a-collection-agency-to-recover-unpaid-accounts/

Thanks to Angie Haggstrom of Freedom Freelance for the excellent links!

Whatever you decide to do, remember something, okay? It’s important to get paid for what you do. Your work has value and shouldn’t be given away. Collecting on overdue invoices shows that you really do mean business, that you’re not just in it as a lark. Don’t let yourself be walked over by a deadbeat client because they don’t see the value. You deserve to be paid.

That said, collecting on debts should not ruin your rep. Maintain a businesslike bearing and never make it personal. Don’t collect out of spite or desperation. Collect because you’re a professional and collect like a professional.

Even eccentric artists like me do it that way. Business is a marathon, not a sprint. Enjoy it and keep running!

David Billings is an illustrator, animator, and writer. He currently runs two businesses from his home studio near beautiful Mount Hood, Oregon.

Sparky Firepants Images is focused on building kids’ brains to ginormous sizes while they have a crazy time. David creates fantastic, colorful images that complement books and educational media for preschool and elementary-level kids. A unique perspective on children’s publishing and the business of illustration can be found on his blog.

He also uses his technical expertise in creating corporate graphics and presentations to consult with and assist presenters of all types, keeping their audiences rapt with attention. Prepared Graphics focuses on helping individuals and small business owners with great content who don’t want to mess around with that PowerPoint stuff.

David lives with his wife and children on an alpaca farm. No, they don’t really smell that bad.

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When Clients Don’t Pay: Part II – How to Get Paid without Hiring Muscle

Jan 30, 2009

In my last post, When Clients Don’t Pay: How to Collect Without Involving the Mafia, I shared some experiences and talked about steps you can take before you even start to get worried about not getting paid.

This post focuses on what to do after you’ve taken all those steps and remain empty-pocketed.

We talked about maintaining a business relationship, whether or not you plan to work with this client again. A good way to do this to keep things on a business level. Once you make it all personal and emotional, it’s almost impossible to recover. You may feel like strangling the object of your invoice woe, but save it for your daydreams.

You can still get what your entitled to without drama or… screaming. Trust me on this one, I’ve been both the screamer and the screamee; you lose even when you “win.”

So the first step in our collection process is a simple, friendly reminder. A short e-mail will suffice, like this:

I just wanted to see how things are going with those new web graphics. If you need some help implementing them, just let me know.

Did you have any questions on the invoice I sent last week? If so, I’m happy to answer them.

At this point you aren’t out to hassle anyone or demand anything. You’re just trying to get the communication going. Most of the time when I do this I get one of four responses:

I never got it.
Oops - I have it but forgot to send it to accounting.
You didn’t get a check yet? I’m so sorry, let me look into that.
I have it and I’ll pay you as soon as I can.

If they never got it, simply send it again – but follow up right away to make sure they did. For #2 and #3, set a reminder to check in a week later with another friendly inquiry. If you get a #4, that’s still a good thing. It says that they are communicating to you an intention to pay. At least they’re not disputing the bill. That’s a whole post in itself.

Are they lying? Maybe, but you can’t assume so and the good news is that you have them talking. They didn’t say they wouldn’t pay, so chill out a bit.

So when do we get to start harassing them for the money? How about never?

That’s right. Never work the harassment angle. There are laws against that sort of thing and it won’t make it easier to get paid. The things is, you’ve got a logical system of figuring your chances of getting a check, which involves answering some basic questions:

Are they communicating with you?
Do they have the bill?
Do they intend to pay?
Do they have the money to pay?

The only two that you have any control over are #2 and #3. If they don’t have the bill, send it (or send it again). If they intend to pay but haven’t you can ask again at a later date.

You can’t control whether or not they communicate with you or the balance in their checking account. Do you have to give up? Of course not, but you didn’t expect I would tell you to give up anyway, did you?

If a client owes you money but isn’t communicating with you, the first thing you need to do is make sure you’ve tried all methods of reaching them. Sending another e-mail after they didn’t answer the first three is, well… kinda stupid. Did you try calling them? Did you leave a voicemail? Did you snail mail them a copy of the invoice? Did you send it with a return receipt?

What you need to find out is if they are receiving you. Servers go down, businesses move, family crises come up, mailrooms lose mail, and all of these things can happen without someone keeping you in the loop. So before you assume they’re ignoring you, try every method until you get a response (a return receipt might be considered a response). You’re just searching for a pulse here.

If you get a pulse, great. Now you can work from those possible action steps we talked about earlier.

If you don’t get a pulse, you can still dig deeper to contact your client. If it’s a medium to large-sized business, it’s a little easier. Are they a member of the Better Business Bureau? How about their local Chamber of Commerce? Do they have a web site or blog? Find out if they’re even still in business. If they aren’t, you may be out of luck, or it’s possible there’s someone new handling the company’s debts. It’s research, it’s detective work, but how badly do you want that money?

How about the client who intends to pay but doesn’t have the money? Before you get a hornet in your crotch, go back to that relationship thing we talked about. Ask yourself some tough questions about the situation.

Have I enjoyed working with this client? Do I want to work with this client again? Is this a chronic issue or a one-time problem?

As I write this, I’m in this very situation with a good client. Last year we did a lot of business together and he either paid early or at least on time. I recently completed a project for him and it’s becoming obvious that he simply doesn’t have the money to pay the invoice, which is about 30 days past due. He intends to pay me and we are communicating.

I recently offered to break the invoice into payments which should make it easier for him. Ideally I would have a nice influx of cash all at once, because I’ve got my own bills to pay. I have some choices.*

I can get nasty and demand that he start paying immediately. Should I care how he gets my money? Just friggin’ get it, man!

It might feel good to let off some steam, but that probably won’t get me any farther ahead. Likely, we’ll never do business again, even after he pays me.

What I will do is be a little patient with him. This doesn’t mean he can walk all over me; we do need to agree on a manageable payment schedule. I’m fair, but I’m firm about this.

Also, I’m not going to begin any new projects with him until this invoice is paid (I hope that’s obvious, but I felt I should mention it). For future projects, we’ll have to work out a deposit or escrow system to avoid this happening again. Not only will I be certain I’m going to get paid, I’ll feel more relaxed working the gig.

This begs the question, what if I don’t want to work with this client ever again?

Fair enough. Even if you don’t intend to do any future work with that client, you need to stick to a businesslike bearing. Wearing your disgruntled emotions on your sleeve is not going to get you what you want anyway. Besides, who knows what connections this client has? If they tell their network how much you sound like a snorting bull on the phone, it could come back to haunt you.

My intention here is to show you new ways to think about your situation. Be honest, don’t you care a little bit more about getting paid when your own business is slow? Try not to let your own financial worries interfere with the good relationships you’ve worked hard to cultivate.

Maybe you’ve gone through every thought process and action step I’ve outlined here and you’re still not getting paid. What now, Mr. Smarty Pants Client Compassion Guy?

There are actions you can take. In my next post, I’ll talk about where to go from here. I’ll talk to some freelancers who have dealt with this situation, and I’d love to get a handful of experiences from our readers. Please consider this question for your response:

Have you used a collection agency or attorney to get a client to pay? If so, what was your experience?

Post your comments below, or e-mail me at david@sparkyfirepants.com. Please leave out the names of any clients you’ve had issues with!

*As I post this, the client I wrote about in the example has paid. For the record, I didn’t have to break any limbs or call a federal agency.

David Billings is an illustrator, animator, and writer. He currently runs two businesses from his home studio near beautiful Mount Hood, Oregon.

He also uses his technical expertise in creating corporate graphics and presentations to consult with and assist presenters of all types, keeping their audiences rapt with attention. Prepared Graphics focuses on helping individuals and small business owners with great content who don’t want to mess around with that PowerPoint stuff.

David lives with his wife and children on an alpaca farm. No, they don’t really smell that bad.

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When Clients Don’t Pay: How to Collect Without Involving the Maﬁa

Jan 23, 2009

By David Billings

Have you ever noticed that late payments happen when you need cash the most? I think there’s a World Freelance Mojo Consortium monitoring all home ofﬁce billing activity.

It’s easy to get your knickers in a twist when somebody owes you money. Let’s be honest; your ﬁrst concern is paying your own bills, so when you have to ask repeatedly for a client to pay an invoice, your shoulders bunch up and your brow gets all wrinkly. That’s not good posture to have when you’re trying to help other clients and bring in new business. So what can you do about it?

First things ﬁrst. Before you start Googling collection agencies, I have to ask: have you tried to ﬁnd out why your client hasn’t paid?

Recently, I was waiting for a check to arrive from a magazine client and wondering what happened. Things had gone so well, why would they stiff me? After asking some very strategic questions to maintain the charade that I’m a smart man, I realized that I never submitted an invoice.

I think the lesson here is obvious. Don’t tell anyone I did that, ok?

Let’s assume you are smarter than me and completed this step in the process. You might have learned that Company X only pays vendors on the XXteenth of the month. You can chill out a bit because you now know that they intend to pay you and when.

What do you do if things aren’t tied up in such a neat little bow? What if you can’t ﬁnd out what they intend to do so easily? Don’t worry, we can still handle this.

First, ponder this question carefully: Which is more important to you with this client; the money or the relationship?

If you were hoping there was a simple right and wrong to this, I’m sorry. It’s a very personal question that only you can answer, but it will help you to better understand the
situation before acting.

Money

Hey, sometimes it’s just about the money. Sometimes you don’t click with a client and the work isn’t terribly rewarding. You can’t see yourself ever working with this person or company again, no matter what the pay is like. It happens.

Relationship

This is nice. It requires more delicate handling, but you should feel great knowing that you want to keep working with this client. There must be something rewarding about it besides sending the invoice.

Whether you answered “money” or “relationship,” you’re going to approach this problem exactly the same way. Understanding the difference is just to help you resolve any internal conﬂicts about what you hope to gain from here on out.

I know. I hear you. You just want your check as soon as possible so you can pay your own bills and move forward. That’s cool, but now I have more questions for you.

Did you have a contract?

Did you set a payment schedule?

Please say you have a written contract. Always have a written contract. The contract lays out the particulars in advance of doing any work. That way, you’ve got something on paper to go back to when disagreements or misunderstandings arise.

Setting a payment schedule is not only a good way for you to get your money on time, it keeps you in control of the work. If you establish completion phases that coincide with payments, you’re off to an excellent start. Hot tip: you can tell when a client will tend to pay on time because they will either initiate this or thank you for spelling it out.

What if you don’t have a contract? Well, all bets are off, my friend. You will be relying on the benevolence and integrity of your client. Lesson learned!

If you do have a contract, review it again. Make sure you understand it fully before you move forward with any action. Avoid the embarrassment and just read it again.

Here’s another important question for you: Are you still working on the project?

If you are, then… stop. It may sound silly to you that I even mention this, but it’s not always obvious to everyone that they’re “allowed” to do this. Let your client know (ﬁrmly, yet politely) that you must stop all work until you’ve been paid for what you’ve done to date. Do you see how valuable a payment schedule can be?

Consider how fortunate that you’re still in communication with this client and seize the
opportunity to talk it over.

It bears mentioning that whether you picked Money or Relationship, you should always be polite. Go ahead and vent to your husband, throw your potted plants out the window in frustration, but always display a calm and businesslike manner to your client. It’s not about being a pushover, it’s about taking the higher road. Besides, you will make it more difﬁcult to collect if you’re a jerk, I promise. Making people angry at the injustice of it all is satisfying for approximately ten minutes. After that you will feel like a schmuck.

So we’ve all got our service-with-a-smile helmets on, now what? We still don’t have any
money.

Assuming that you’ve gone through the steps above and there’s no cash in sight, you need to take some action. If you’re hoping that this is part where you “get medieval” on your clients, I’m sorry to disappoint you. There are quite few steps between here and Cosa Nostra-style action and in my next post I’ll walk you through them.

Until then, I think it’s important to mention this relationship thing again.

You won’t be in any business long if you don’t make money at it, but there’s a difference between short-term money and long-term money.

Short-term money means that if you want quick cash, you might use whatever means necessary to collect on your invoice immediately. Even if you actually get paid, the likelihood that you’ll do more work for that client is chancy at best. How many clients can you do that with and maintain a good reputation? Sooner or later, the word-of-mouth marketing that works so well for some people will backﬁre on you.

Think about long-term money as an investment in your future. If you focus on preserving the relationship, it’s possible you will get paid late this time but also likely that you’ll have an opportunity to work with that client again (assuming you want to). On the next project, you can spell out a better contract that works to get you paid sooner.

Next: Part II: How to Get Paid without Hiring Muscle

David Billings is an illustrator, animator, and writer. He currently runs two businesses from his home studio near beautiful Mount Hood, Oregon.

Sparky Firepants Images is focused on building kids’ brains to ginormous sizes while they have a crazy time. David creates fantastic, colorful images that complement books and educational media for preschool and elementary-level kids. A unique perspective on children’s publishing and the business of illustration can be found on his blog.

He also uses his technical expertise in creating corporate graphics and presentations to consult with and assist presenters of all types, keeping their audiences rapt with attention. Prepared Graphics focuses on helping individuals and small business owners with great content who don’t want to mess around with that PowerPoint stuff.

David lives with his wife and children on an alpaca farm. No, they don’t really smell that bad.

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