When Clients Don’t Pay Their Bills

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    http://www.flyteblog.com/flyte/2007/01/when_clients_do.html
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I’ve always heard horror stories of small business owners and clients who don’t pay their bills. Stories of owners laying out thousands or tens of thousands of dollars in products or services and then being unable to get a client to pay for it.

Sometimes the client’s business takes a nosedive or goes bankrupt. But what happens when the client just refuses to pay? They stall, asking for additional copies of the contract, or invoices, or they need to talk to accounts payable. Then they just stop returning your calls.

Obviously, I’m not writing this in a vacuum. I should count myself lucky that no one in the nearly 10 years we’ve been in business has ever stiffed me for more than pocket change, but it still stings when it happens.

I’m wondering if anyone out there wants to share some similar horror stories (no client names please!), or if you have some clever ways of guilting delinquent clients into paying I’m all ears.

Rich Brooks
Stiffed

  • http://www.businesssanityblog.com Susan Martin

    I don't have any clever strategies, but the trick is not to let up. If they're not paying you, they're probably not paying others too. If you stop bothering them, they'll pay others who don't. (squeeky wheel theory) If they're local stop by their offices during business hours and demand to speak with them.

    If you've tried all this and it hasn't worked, bite the bullet, send them a certified return receipt letter telling them if it's not paid in full within 5 days you will put them in for collection, report them to credit reporting agencies, etc. If the amount is large, you may even consider suing them. Collection agencies do take a big cut, but if they're good and do the job it's money you may never see otherwise.

  • http://www.businesssanityblog.com Susan Martin

    I don't have any clever strategies, but the trick is not to let up. If they're not paying you, they're probably not paying others too. If you stop bothering them, they'll pay others who don't. (squeeky wheel theory) If they're local stop by their offices during business hours and demand to speak with them.

    If you've tried all this and it hasn't worked, bite the bullet, send them a certified return receipt letter telling them if it's not paid in full within 5 days you will put them in for collection, report them to credit reporting agencies, etc. If the amount is large, you may even consider suing them. Collection agencies do take a big cut, but if they're good and do the job it's money you may never see otherwise.

  • http://blog.looseends.net Katie Baird

    Ouch. This brings back a bad memory.

    The clients were in a rush, but they seemed to fit the profile of my ideal prospect. I hadn't been in business all that long and I was only too happy to put their very important project on my front burner.

    Hoping to score some points with my timeliness, I was unconcerned when their promised deposit did not arrive when they said it would, and I worked through the weekend trying to get the project done for them. I sensed their urgency but simply attributed it to the fact that they were a successful and well positioned firm.

    Naturally, there were numerous change requests and difficulties catching up with them as they were in meetings all the time and couldn't/wouldn't return my calls. They changed directions several times in terms of the project scope and, ultimately didn't pay for any of the work I did.

    I tried for several years to get them to pay. Having exhausted every resource I turned up, I finally filed their past-due invoice and other documentation. Unfortunately, when I saw that paperwork in my receivables files every month, I got enraged all over again.

    I learned a lot from the experience, and what I did learn has definitely saved me from having a repeat experience. In fact, what they owed me is a drop in the bucket compared with the cost effective business practices I implemented as a result, and what I have earned since.

    I think I'll just shred that past due invoice today and move on.

    Thanks for inspiring me to reflect on this incident once more, and for the subsequent insight I have gained from doing so.

  • http://blog.looseends.net Katie Baird

    Ouch. This brings back a bad memory.

    The clients were in a rush, but they seemed to fit the profile of my ideal prospect. I hadn't been in business all that long and I was only too happy to put their very important project on my front burner.

    Hoping to score some points with my timeliness, I was unconcerned when their promised deposit did not arrive when they said it would, and I worked through the weekend trying to get the project done for them. I sensed their urgency but simply attributed it to the fact that they were a successful and well positioned firm.

    Naturally, there were numerous change requests and difficulties catching up with them as they were in meetings all the time and couldn't/wouldn't return my calls. They changed directions several times in terms of the project scope and, ultimately didn't pay for any of the work I did.

    I tried for several years to get them to pay. Having exhausted every resource I turned up, I finally filed their past-due invoice and other documentation. Unfortunately, when I saw that paperwork in my receivables files every month, I got enraged all over again.

    I learned a lot from the experience, and what I did learn has definitely saved me from having a repeat experience. In fact, what they owed me is a drop in the bucket compared with the cost effective business practices I implemented as a result, and what I have earned since.

    I think I'll just shred that past due invoice today and move on.

    Thanks for inspiring me to reflect on this incident once more, and for the subsequent insight I have gained from doing so.

  • http://www.GrittyVA.com The Gritty Virtual Assistant

    My comments have more to do with prevention. Have solid contracts drawn up by an attorney (don't rely on the generic forms you get at OfficeDepot–those will NOT protect your interests and are full of holes) that include provisions about what happens when payments are not made and other contractual obligations are not met (all work ceases; fees and interest applied; lien clause stating all client property will be held until all obligations are met, etc.). Also, look at your payment policies. Don't let clients get that much into the hole with you. Require deposits upfront (at least 50%) or even full payment in advance depending on the project. Require expense retainers upfront. Bill in increments after that so that you don't expend valuable business resources without payment along the way (if you don't, you run the risk of having wasted all that billable time on net getting paid).

  • http://www.GrittyVA.com The Gritty Virtual Assistant

    My comments have more to do with prevention. Have solid contracts drawn up by an attorney (don't rely on the generic forms you get at OfficeDepot–those will NOT protect your interests and are full of holes) that include provisions about what happens when payments are not made and other contractual obligations are not met (all work ceases; fees and interest applied; lien clause stating all client property will be held until all obligations are met, etc.). Also, look at your payment policies. Don't let clients get that much into the hole with you. Require deposits upfront (at least 50%) or even full payment in advance depending on the project. Require expense retainers upfront. Bill in increments after that so that you don't expend valuable business resources without payment along the way (if you don't, you run the risk of having wasted all that billable time on net getting paid).

  • Brian

    my client stung me for 3500.00 bucks in transportation costs. to add insult to this he started up a new business (same product) and just walked away from the old company.

    when I told him I will see him in court he told me "that will never happen"

    I checked that statement out, he is right, he can drag this on to infinity.

    what do you think, sign off to a collections agency???

    here is a snapshop –

    He was President of a company
    he claims he was really not the real owner, and referred me to the supposed owner (he took a few calls but said he has no money)

    any advice is appreciated, I really cant afford to lose that much money.

  • Brian

    my client stung me for 3500.00 bucks in transportation costs. to add insult to this he started up a new business (same product) and just walked away from the old company.

    when I told him I will see him in court he told me "that will never happen"

    I checked that statement out, he is right, he can drag this on to infinity.

    what do you think, sign off to a collections agency???

    here is a snapshop –

    He was President of a company
    he claims he was really not the real owner, and referred me to the supposed owner (he took a few calls but said he has no money)

    any advice is appreciated, I really cant afford to lose that much money.

  • http://www.nomad-one.com nomad-one

    Just battling 2 clients to get my money. I'd tried getting hold of one of them for ages, and received a few promises and many excuses, then I threatened him with legal action and to name and shame him in my network.

    he mailed me back in a few mins sayign he'd pay in a few days, so now I need to wait out those few days.

    the other Client I threatened to take down the site i had put up for them, apparently the problem is I have an attitude problem for expecting payment by the time it was promised.

    Haven't found the secret weapon to get payment. i think the threat of legal action is probably the best. If you can get a lawyers letter through to them that would help.

    Contracts are crucial. Good luck to all of u in getting your hard earned bucks.

  • http://www.nomad-one.com nomad-one

    Just battling 2 clients to get my money. I'd tried getting hold of one of them for ages, and received a few promises and many excuses, then I threatened him with legal action and to name and shame him in my network.

    he mailed me back in a few mins sayign he'd pay in a few days, so now I need to wait out those few days.

    the other Client I threatened to take down the site i had put up for them, apparently the problem is I have an attitude problem for expecting payment by the time it was promised.

    Haven't found the secret weapon to get payment. i think the threat of legal action is probably the best. If you can get a lawyers letter through to them that would help.

    Contracts are crucial. Good luck to all of u in getting your hard earned bucks.

  • http://www.accountinghomeworkhelp.9f.com accountinghomework help

    Thanks for inspiring me to reflect on this incident once more, so now I need to wait out those few days.

  • http://www.accountinghomeworkhelp.9f.com accountinghomework help

    Thanks for inspiring me to reflect on this incident once more, so now I need to wait out those few days.

  • Rob

    I have done some design work for a printer for his customers. He owes me around £200 and is very late in payment. He also acting strange regarding the invoice, asking for a more detailed breakdown etc. Luckily I was able to provide this but despite several phone conversations and promises he is still stalling "Ive just moved house" is his latest excuse.

    If he doesn't pay by the end of this week Im going to pursue his customers for payment and taking him to a small claims court. I will tell him this verbally first and hope he comes round. It will come down to: does he want to be embarrassed and probably lose the services of 10 customers of his I have done work for or does he want to pay the small amount of money he owes.

    He always struck me as being a bit shady and I should have stuck to my instincts and turned him away. The work was not really of the nature of asking for a 50% downpayment also.

  • Rob

    I have done some design work for a printer for his customers. He owes me around £200 and is very late in payment. He also acting strange regarding the invoice, asking for a more detailed breakdown etc. Luckily I was able to provide this but despite several phone conversations and promises he is still stalling "Ive just moved house" is his latest excuse.

    If he doesn't pay by the end of this week Im going to pursue his customers for payment and taking him to a small claims court. I will tell him this verbally first and hope he comes round. It will come down to: does he want to be embarrassed and probably lose the services of 10 customers of his I have done work for or does he want to pay the small amount of money he owes.

    He always struck me as being a bit shady and I should have stuck to my instincts and turned him away. The work was not really of the nature of asking for a 50% downpayment also.

  • http://www.telswitch.com Aaron Woolfson

    Thank you for posting this. This really resonates.

    One of our clients, a publicly held company, asked for the "accounts receivable going back to 2008", and another client, a large publicly held company, said "are you going out of business, because you're asking us for money and telling us that it affects your cash flow when people don't pay?"

    LOL.

    I'll let everyone know how it goes. If I don't get payment by mid-next week, discontinuance of services for those two. And they can go and find someone else who would serve them better! And doesn't mind not getting paid.

    Oh, what do we do for them? lol. We do their billing!!! ;-)

    HOW SHORT SIGHTED.

  • http://www.telswitch.com Aaron Woolfson

    Thank you for posting this. This really resonates.

    One of our clients, a publicly held company, asked for the "accounts receivable going back to 2008", and another client, a large publicly held company, said "are you going out of business, because you're asking us for money and telling us that it affects your cash flow when people don't pay?"

    LOL.

    I'll let everyone know how it goes. If I don't get payment by mid-next week, discontinuance of services for those two. And they can go and find someone else who would serve them better! And doesn't mind not getting paid.

    Oh, what do we do for them? lol. We do their billing!!! ;-)

    HOW SHORT SIGHTED.

  • Katherine Hinbest

    Phoning them every 3 days seems to help. Be persistent.

    I am in the process of setting up an association for similar businesses where we would share information regarding clients who are slow to pay, or do not pay at all. We will then refuse to work for a client if they owe money to someone in our assocation.

    We repair dump trucks and snow plows. If they can’t get it fixed they can’t work.

  • Katherine Hinbest

    Phoning them every 3 days seems to help. Be persistent.

    I am in the process of setting up an association for similar businesses where we would share information regarding clients who are slow to pay, or do not pay at all. We will then refuse to work for a client if they owe money to someone in our assocation.

    We repair dump trucks and snow plows. If they can’t get it fixed they can’t work.

  • Cosmogirl1011

    I had a client who was a regular so I started doing stuff more stuff for her without payment up front and then she stopped paying…
    Don’t let your clients get comfortable with you and letting them slide on payments

  • Johnmith

    Dear Sir/Madam

    When people do not pay me for work completed I usually visit them and politiely ask why they have not paid. If they still give me the run around I take them to the small claims court. I then charge them all court fees and interest since the date when the invoice was posted. I charge them for any addtional fees such as business searches or person searches. Then if they stall I was 21 days then have the Sherrifs pay them a visit. That always get a reaction. Indians are my worst customers for paying.

  • Aaronsbuilding

    I am an independent contractor. I always seem to get to the end of the job, and people just won’t pay. Of course it cost me being late on all my bills, hardship at home, and time and aggrivation. It is frustrating, I have a good contract they sign, but being that I am independent it’s hard to find the time to go to the court house and appear in small claims but I need to do it! Right now my phone, cable etc. have been shut off becuase this woman has put off payment and I kept working then she just said thats it and has not paid me.

  • None

    I am a debt collector. Almost everybody in this country hates my profession. Since I answer to nobody but the ones who cut my checks, I don’t find that to be a problem.
    Your situation is one of millions where consumers think they can take advantage of goods or services because of their own admitted ignorance. To avoid this, don’t let people sign contracts without being able to prove they are eligible to pay you back, lesson one. Millions of people will take advantage of credit or services simply because they are THAT desperate. Yet they will have no intentions of paying you back, since they will find something wrong with your service to justify their incompetence. People in this day and age only pay for things they continue to receive, such as electricity and water and gas. There are nanny state laws which allow people to open accounts, borrow goods and obtain services without being held accountable for their actions. The main thing to remember is DON’T LET THEIR RIGHTS INTERFERE WITH YOUR RIGHTS! If some bimbo tells you you can’t sue her because she has 3 kids and receives SSDI government checks, remember you can still sue her and place a lien against her property. this means you are guaranteed your money back if that person ever decides to sell her property. A property is anything with a title or deed. As long as you keep in mind THEY GOT SOMETHING FOR NOTHING and you need to do what you need to do to get your money back, you should be fine. Don’t ever accept people’s verbal word for a contract. You have a business to run. You’re a professional. You expect nothing less than a professional contract from the people you conduct business with. I’ve collected money from contractors who claim they are unable to pay me on a written contract because they failed to collect on their business of verbal contracts. Who is going to win this argument? Unfortunately, people with fixed government incomes are immune to legal consequences (yet they are free to open accounts and obtain services without questions) so the burden of proving accountability has to come from you. In many cases, when trying to collect money from irresponsible do-nothings you need to prove that you are NOT HARASSING them.

  • Ah6598

    well this man did not pay his bill .
    so he gone to jail .

  • Hum

    if you are a business owner and want to sue in small claims court, do you sue the individual or the business of the individual (who wont pay). I am not sure who to list as the defendant.

  • Skuggs

    I heard there was a “list” in Utah. Specifically, my clients (or their representative) higher us to collect for them . . . and we successfully complete the job. However, they are either slow, or want to change the terms. What is a small owner to do when we are in another state? We can’t afford to spend thousands of dollars, just to collect hundreds — the unpaid bills all add up.

  • Cory

    I deal with this daily and can help you. Not too many people are aware that there is insurance that protects you from non payment of your receivables. If you sell to someone….they don’t pay you…the insurance company steps in and will pay you. You pay an annual premium to protect you. Also, you can sell more aggressively to riskier clients (because you are guaranteed payment). This is the only insurance product where you actually get a return on your investment. Call my office and I’ll give you the low down. I work for Euler Hermes and am the largest credit insurance company in the world.

    Cory 972-581-0513

  • Ivica

    How to buy land approximately 700 000 m2 by 2.6 M € and do not pay commission to estate agency?
    Ask for advice Mr. Luca Bechis?

    In the next few days You will see a lot of documents about the business Luce Bechis in Croatia.
    Appeal to the Croatian court.
    Criminal charges for fraud to police against Luca Bechis.

  • Beverley

    We ended up going bankrupt 10yrs ago because of people and businesses not paying us, it has taken us until now to get back on our feet. Shame shame on them , I dont know how they sleep at night.   Karma karma

  • Iglesiastyler

    I get stiffer all the time as a collector. I tell them that their excuses for non payment are the bricks in the house of failure. One thing is for sure I don’t know who started the saying ‘You’re not American if you’re not in debt’, but he or she should be flogged. We all have to do our part to keep this delicate economy balanced. If we do not pay our bills it makes harder on businesses especially small businesses eventually they close. This limits consumer choice, thus less competition and higher prices in the end. It’s time we all started being part of the solution instead of part of the problem.

  • Gary – Cedar Rapids

    I had a Heating and Cooling company that I rebuild their website for twice in Cedar Rapids Iowa. I produced a nice website (per her markups) which she changed her mind about the look and content after the first 30 beta pages were complete. Twice she approved my work and told me to move ahead with the build. So I built it again 30 web pages each time. When almost complete through tracking on the beta site I noticed someone besides her was looking at every page of the site. Since the site was near completion I published the site and sent the invoice for my hours and hours of work. I was told by her to take the new website down because she had hired another designer to build the site. This other designer was using my beta site to build his site. And she never told me so I worked on and on. She never paid me one dime for any of the work I did. Then she told me to send any billing or letters to her lawer. I never heard from him. GA from Cedar Rapids

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