With most jobs, it’s simple: You work. You get paid.
But when you’re running a business and doing client work, “simple” isn’t so simple.
There are clients out there who would try to stiff you. Not many, but they do exist.
And a lot of people have issues bringing up payment out of a misguided fear of coming off the wrong way — rude, pushy, obnoxious, etc. And yes, it is most of us. People we talk to who lead development teams, digital agencies, various services, and so on. Starting that conversation to ask for payment is an uncomfortable topic for so many people, despite that making money is what their business is, ostensibly, aiming to do.
What is simple is that not getting paid can sink a business pretty fast.
So we’re here with a list of tips to ensure that you know the proper, professional way to always ensure that you get paid – and how to maintain solid, professional relationships in the process.
1. Detail Payment Terms in Your Contract
Contracts are tried-and-true tools of social order. They are, legitimately, millennia old, having been written about by ancient Greeks and Romans.
And they’re your first line of defense.
Without a solid contract, you are, legally, toothless.
No, not that Toothless. He’s a dragon.
Your ability to, legally, follow through on payment requests is nil if you have no ground to stand on. It becomes your word against theirs if you end up needing to go to court for any reason. And if your client is bigger than you, they’ll likely be able to afford better lawyers, giving you an expensive, uphill battle.
Play it safe! Don’t do anything without a contract!
Make certain that your contracts cover every angle. This doesn’t mean that you can’t cut your favorite or deserving clients a bit of slack or give them deals (you certainly can, but do everything in writing – to protect yourself and them), but it does mean that you’ll have recourse. Just in case.
Here’s what your contracts should include:
- Payment Terms
- This can be broken into dates and amounts at the outset. Or, if you have yet to finalize a scope of work, then the contract can state that the scope of work will include an extension of this contract and more detailed payment terms. Why? See item #8 on this list.
- Late Fees
- Other Fees
- Including Restart Fees (See #6)
As long as your payment terms are in your contract, the battle is already half-won. Don’t leave this out. And if you need a little help with it, the Contracts section in Brainleaf has a few contract templates which can help you out in making certain that your contract is thorough and professional.
2. Clarify Your Client’s Billing Information
Once the project is underway, you’re going to, at some point, need to send a bill. It’s likely that you’ll have an initial payment due at the project’s outset. Maybe that was all handled at the time of signing the contract. Maybe not.
Never assume that the person you think you need to bill is the person you need to bill, even if they’re the person who signed off on the initial payment.
Many companies have designated billing departments or people who fall into a financial management chain of command. So, whether it’s before the initial bill, or it’s been a week and the bill hasn’t been viewed, clarify with your contact with the client exactly who you should be billing.
If you skip this step you’re setting yourself up for an overdue invoice and you can’t blame your client.
It’s entirely possible that your contact is just super nice and doesn’t know how to tell you at this point that this isn’t really her job, so she forwards it to the right person and hopes it gets taken care of. Or the person you were sending the invoice to before it no longer with the company and it’s going out into the ether never to be viewed by human eyes.
You don’t know it’s going to the right place if you don’t ask.
There are so many things that could go wrong if you make assumptions. Your contact for one need is likely not going to be your contact for every need.
You’ll also want to know exactly how your client is going to want to pay, as well. You have your preferences, but those may not line up with your client’s fiscal policy, and you may need to work out a solution that is favorable to both parties.
You don’t want to be arguing about who’s responsible for a wire fee on the same call where you’re asking a client to pay an overdue invoice.
Lastly, you’ll also want to know a secondary contact for billing, in the event of sick and vacation time. Payments take time to arrange. Money takes time to transfer. If Brian in billing is out on vacation or unexpected sick time, then you need to make certain somebody is aware of the bill you sent. If the only somebody you have info for is someone who isn’t in that department, then the payment may be unnecessarily delayed, which can cause headaches on both sides.
There’s No Reason Not To
This is an important ask for numerous reasons, as we’ve covered, but it’s also one of the easiest ones you can make. It’s very easy to phrase the question to ensure that your liaison with the client isn’t offended or annoyed in any way. It’s as easy as: “I want to make sure I am sending your invoices to the right place. Who should I include on your invoices?“
3. Ask If The Invoice Was Received
As a continuation of our last point: there will be instances where something messes up the typical process. Maybe Brian is out sick. Maybe the whole company took a 2-week sabbatical.
Maybe you sent the invoice 4 days ago QuickBooks is telling you it still hasn’t been viewed. Maybe you’re just concerned because there’s more radio silence than usual.
No matter the reason why you have concerns. This is something you should consider doing, even if you’re certain everything is fine.
Ask if the bill was received.
Most of the time, it’ll be a ‘Yes, I’ve got it right here’. But every now and then, it’ll be a ‘No, what bill?’ Sometimes, they’ll even say that when you know for certain that Quickbooks says they’ve got it. If that happens, make an excuse for them if you like and tell them you’ll resend it (in two formats, if you like).
Then, regardless of whether they said they got it or not, you’ve got another tool you can use in the same conversation at any time you think you might need it:
4. Ask How You Can Help
This is your ice-breaker for what would otherwise be a difficult conversation. You have immediately defused the situation by taking the weight off of their shoulders (it can still be re-fused – this isn’t foolproof, so don’t be a fool!).
If they say they haven’t gotten the bill, or have implied that there is a problem, then ask how you can help.
Offering assistance sounds a lot nicer than a demand for payment.
The problems could be as simple as they’ve misplaced your billing address, or they need another copy of the bill sent. Or they might need to ask for another week to get the payment through. In any case, give them a hand.
By opening the conversation up with an offer of assistance, you have begun the process of resolving the problem before you even knew what it was, and before it ever had the chance to grow into an actual issue.
Further, it’s a step in the right direction to cementing a good long-term relationship with the client.
5. Send Reminders
Your clients are busy just like you. Everybody forgets things now and then.
So we heavily endorse the practice of actively reminding your clients of upcoming due dates. And there are a few things to consider in the implementation of this practice.
First, there are plenty of automated reminder systems out there. They definitely exist, and are useful and convenient. We, for example, used ‘Late Fee Reminder’, a plugin for QuickBooks, for a while.
And it was okay. It worked. It met our needs – on the surface.
However, we ultimately found that the approach was too cold and impersonal. It didn’t help us to build relationships with our clients, and thus resulted in too many missed opportunities.
The Courtesy Call Can Work Wonders
So when it comes to reminding our clients and customers, we call, personally. Don’t cringe, I see you cringing… You should be calling to check in with your clients anyways, right? So just throw this in on the end with the ‘offer assistance’ approach and it will be pain-free.
Choose who to send reminders to
You know who needs a reminder and who doesn’t. You likely have clients who pay every single month, always on the due date or x days before, without fail. Like clockwork. These clients may, potentially, be insulted by any reminders you send. Especially the ‘obnoxious’ automated email reminders, which are just one more piece of junk to sort through in maintaining their inboxes. Easy, just skip it for them.
For these clients, a courtesy call is easier to spin than an automated message. That allows you to still get that valuable, relationship-building face-time and figure out if they’re having any issues on their side. It’s also easier for them to politely let you know that these check-ins aren’t necessary.
Finally, for the cynical: reminder calls give you the ability to remove excuses. Even the most problematic clients will pay on time as long as you stay on top of them. For most, again, this will be largely unnecessary, but you still get valuable relationship-building opportunities.
But there are still the occasional instances where even this isn’t enough.
6. Maintain Clear Consequences
Your contract should set forward, clearly, exactly what happens when a payment is late. This should include what fees are applicable and exactly when they charge (thus, if you want to allow any “grace” periods, they should also be mentioned).
Consequences are crucial, and following through with them is a vital step if you want to ensure payment. After all, if you never enforce the rules, then the rules don’t matter, do they?
There’s A Clear Balance To Strike
Just like in every other aspect of life.
Don’t rush into any interactions with your client in a huff after they miss a payment. Don’t assume that they’re just out to stiff you.
The right first step is to repeat your reminder call (#5 above) and lead off by asking how you can help (#4 above).
The very next day after a missed due date, you need to call your client and just be straightforward: “Hey, we wanted to check in with you because your payment was due yesterday, but we haven’t received it. Can you give me an update on the status and see if there is anything we can do to help?”
Don’t let them pull the wool over your eyes, of course, but hear them out and let them know that you care. Chances are good that something just didn’t work out with getting the payment over.
Every client is different, so this is the part where you need to use your judgment. You may opt to cut them some slack. However, you should never feel bad about following through with consequences, up to and including halting any work on the client’s project – because you aren’t delivering for free. Halt now to enforce the idea that your time and your employees’ time costs money, and to ensure that you don’t end up losing money.
So, on the same call that you offer assistance, you need to also make it clear what consequences are on the line. Maybe a late fee has already assessed (because they’re late now), maybe not. But if payment is not received within 3, 5, 10 days – whatever your policy is – these other consequences will take effect.
And don’t let anything slide without good reason.
7. Communicate Scope of Work Changes As They Happen
Even when your scope of work is final, it’s probably not final. The client often finds things they overlooked or realized they missed. Sometimes you can defer these changes by putting them down as updates to be completed once the MVP (Minimum Viable Product) is out of the door.
But sometimes, you can’t. This leads to necessary changes to the scope of work, and, consequently, the overall timeframe and cost. This leads you to a conversation with the client where you need to request more money.
And you have to stick to your guns on this.
Before you actually enact any changes to the scope, make certain that the client signs off on it, with the changes to the timeline and overall cost clearly visible.
By not doing this, you’ll lose money. A lot of it. Every time.
And not just from doing what amounts to free work – you’ll also leave the client assuming that you were able to roll in the additional work with no changes to timeline or cost. Thus, when you end up running behind that original estimate, the client believes the fault is yours, and your reputation takes a hit.
So figure out what works best in terms of how to charge for the changes, and then have an honest conversation. It’s better for everybody.
8. Work On Client’s Money
You should never have to pay your team out of your own coffers when working on a client project. Your client’s payments should cover the work needed at each stage of the project.
This way you’re never actually losing money if you don’t get paid at any point during a project. If a client decides to stop paying for a project, it’s only their money which has been, technically, ‘lost’.
After all, it’s their project. You shouldn’t go into debt to complete a project that isn’t yours.
So when you set up your contract and the full payment terms, make certain that payments are structured in a way where this is feasible.
And, as we mentioned in #6, if a payment is not received, then you can halt development on the client’s project. Move your team to other projects in the meantime and, when payment finally comes in, charge a Restart Fee. It takes time and effort to get a project rolling again because you have to reassign your team to ensure they have continuous work, or else you might lose them.
The client can’t complain – they’re the ones who failed to pay. They signed the contract which listed these fees in detail.
What Do You Do If You Still Don’t Get Paid?
If you follow the eight measures detailed above, you will likely never have a client who completely fails to pay. But they’re out there.
Sometimes it just doesn’t work out. Or something happens and the client has to back out.
Regardless of why, you do have recourse.
- You have broken your payments structure up into increments of no more than $25k
- You have a signed contract detailing the terms
You can take the client to small claims court.
You’ll likely never have to do this, especially if you follow all of the advice we have laid out here. In fact, we’ve only ever had to take one client (one in 20 years!) to court, and it was due, in part, to the fact that we hadn’t learned all of these things yet.
We started working on our own money after a client promised payment and it never came in. Our agreement was with the CEO, who signed a contract with us. Then, as we’re trying to get payment, still working on this project, the COO, who happens to be married to the CEO, contacts us and states that he did not approve the project.
Well, we still had the CEO’s signature, and we didn’t appreciate their attempt to screw us over, and the judge agreed.
Bad clients exist. But they are, thankfully, not very common. You shouldn’t have any issues getting paid on time if you follow the eight steps detailed above, even if you get a sketchy client.
Like just about everything else we post for you, we’ve learned all of this the hard way. You’ll do a lot better than us if you can make use of the hard-earned advice we’re offering here.
And this isn’t nearly the end of it. Let us know if you have any questions or would like a little help!
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