Business

What To Do When A Client Is Not Paying You?

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Late payment is an issue faced by businesses and freelancers alike.

As freelancers or businesses, we have all been in a situation where a client is not paying us. Maybe it did not happen to you (lucky for you) but trust me when I say that many people face this issue. Until recently, I did not face this issue. Therefore, whenever people brought up payment issues, I could not understand their perspective.

However, a few months ago, I found myself in the same situation.

My Experience As A Freelancer

I completed work for a client amount to $200 USD. The work was related to freelance writing. As per the contract, the client had to pay me $50 in advance, which he did. The remaining amount was to be paid after the work was delivered and approved by the client.

The contract stipulated that the client would take a maximum of 3 days to assess and complete the work. If the client did not communicate any changes in 3 days, the work is to be considered approved. Anyways, 3 days passed. There was no feedback from the client. Now, I decided to wait for the payment.

2 days passed, there was still no payment. I contacted the client to ask for the payment. But there was no response. Naturally, I started to fear that the client had defrauded me. Surprisingly, on the 4th day, the client contacted me himself. He said that he had been held up in an emergency and did not find the time to send the money. I was relieved. The client paid me the full remaining amount and $20 extra for paying late.

This shows that we should understand that sometimes payments do get delayed. Although a contract must be honoured, sometimes, unforeseeable circumstances arise which are beyond one’s control. In such cases, instead of acting out, one must remain composed. That is what I learnt from my experience and encourage other freelancers & businesses to do as well.

Apart from this, let’s see what to do when a client refuses to pay you.

Communicate

Whether you are an Upwork Freelancer or other type of resource or business, this rule applies to all working relationships. At times, there might be a communication issue between you and the client. You might be thinking that the client has to pay me on this date, whereas, the client simply thought otherwise. It did happen to a friend of mine.

As per the agreement, the payment was biweekly. Now, my friend thought that it meant twice in one week. On the other hand, the client meant he will pay once every two weeks. The issue was resolved by simple communication.

Therefore, before burning all bridges with the client by doing something drastic, just communicate with him. Also, there are cases where the client has sent the payment. But it did not reach you. It can be due to a bank error or issue on their part. The point is that it is always better to ask the client instead of overthinking.

Charge Late Fees

We all have bills to pay. When a payment gets delayed, we might miss the due date on our bills. Hence, we have to pay late charges as well. As a business, late payment means you cannot pay your employees on time. It leads to a variety of other issues. Therefore, when a client is not paying you, start charging late fees. It might spring the client into paying you immediately as no one likes to pay extra.

This is not on the issue on freelancing websites like Fiverr, Upwork, Guru or WriterBay, as the money is already taken from the client beforehand. It is the platform which is depositing money in your account. But if you are working outside these freelancing websites i.e., directly with a client, always add a late fee charge in the contract. This way, when clients do not pay on time, you can get extra payment for the delay.

Stop Your Work

If the client is not paying you for a while, stop working on the project. Unfortunately, some clients withhold payments on purpose. So, there is no point in burning your energy & resources, when payment seems unlikely. Tell the client you will only resume work once the previous payments are cleared. Once done, you can resume your work. Until then, focus your energy and resources on other projects & clients. Freelancers and small businesses should avoid dedicating all resources to a single project. Always keep multiple projects. It will help ensure that you stay afloat in case a client refuses to pay.

Do Not Deliver The Final File/Project

It goes without saying that do not send the final file or completed project to the client before the payment is made. This way, the client gets nothing, whereas, you can still sell the project to someone else. Always try to maintain access to the project if you have submitted it. For example, if it is a website, try to have access to the admin panel. If a client refuses to pay, simply block their access to the website. The same rule can be applied in other ways to projects of different kinds.

Go For Factoring

Many people do not understand or know what factoring is. But trust me, this is probably one of the best things around when a client is not paying you. Factoring is best understood through an example. A is a company which has to pay $1000 to B. But A refuses to pay. B decides to sell his invoice to a 3rd party called C.

C is what we call a ‘factor’. C buys the invoice from B at a discounted rate. In this case, the actual amount is $1000. But C will buy it at maybe $900 or $800. Whatever the amount, it is always less than the actual amount. Now, B gets a discounted payment (something is better than nothing). Now, whether C gets the invoice cleared from A is not your headache anymore. Losing out on the full amount is not great. But at least you got paid something.

Freelancers & Businesses Must Take Legal Action

How to get a client to pay an invoice if all else has failed? Take legal action! Many small businesses or even freelancers hate taking legal action. It is expensive and quite exhaustive. Hence, many opt for factoring instead. But if you have the resources, I encourage you to take legal action against the client. A legal notice is, at times, enough for a client to send payment at once.

It is always a good practice to insert a dispute resolution clause in a contract. I highly recommend it to freelancers working with clients directly. Alternate dispute resolution methods like arbitration or mediation are cheaper & less time-consuming. Courts should be used as a last resort only.

Final Words

I hope that you find this article interesting & informative. Share your valuable feedback in the comments section below. Hopefully, freelancers & businesses are able to take advantage of the information provided above. It will surely help you in your professional dealings.

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