Chasing a non-paying customer is often a messy process, so it’s best to avoid the issue altogether by taking the following precautions.
1. Research your client.
If you’ve never worked with a client before, take the time to do research and find out who you’re dealing with. Google their name, ask your contacts if they know anything about your new prospect, and see if there are any complaints against them on sites like the Better Business Bureau.
“Most non-payments can be prevented or severely minimized by screening the customers in advance,” said Jocelyn R. Nager, president of Frank, Frank, Goldstein & Nager, a professional legal corporation. “Thanks to all information available on the internet, especially the court records, notice of liens and more, most often you can run a risk assessment on your own … and the possibility of non-payment should be reflective of your tolerance for risk.” [Looking for a collections agency? Read our recommendations and reviews on our Best Picks page.]
2. Have a contract.
No matter if it’s your best friend or one of the most respected business leaders in your industry, always have a written contract in place. The contract should address these legal concerns:
Payment schedule: e.g., 40 percent deposit, 40 percent milestone payment and 20 percent on completion
Terms: e.g., payment either 30, 60 or 90 days after the invoice is sent
Preferred payment method: e.g., checks, credit card or PayPal
Scope: the exact work you are expected to complete
Deadline: expected completion date
Late payment policy: amount charged if invoice is not paid on time
It’s essential to get all details in writing so you don’t face issues down the road. For instance, if your client is aware they owe fees for overdue expenses, they’ll be less likely to flake – and if they do, they’ll be forced to pay interest. But if you fail to set up a contract, nothing is guaranteed.
Don’t set yourself up for problems that can be easily avoided. You can find service contracts for free and online.
3. Ask for a deposit.
If you ask for a portion of the payment upfront, you’ll absorb some of the hit. Asking for a deposit or retainer is common for freelancers when negotiating with clients and will help cover the expenses or time that you already put into a project.
According to Tina Willis, owner of Tina Willis Law, the amount you should ask for depends largely on the industry. If workers in your position do not typically charge retainers, consider installment fees, which are paid as you complete certain parts of the job.
“That way, you are less likely to do way too much work before getting paid, or realizing that you are never going to be paid,” Willis said.