What Happens if Your Client is Past Due?

Have you ever had to deal with a late paying client? We all have. It's not a fun experience is it? You give 100% effort to make things perfect for your client only to have them pay late, or worse, they ghost you all together. Been there. Done that. Not fun at all. 

The goal of this post is to talk about why this happens and how you can prevent it from happening, but also to cover the steps needed to get paid.

Why Do Clients Pay Late?

There could be many reasons why they are late:

• New Account. In my experience, the first payment was often late. That's due to setting you up in their system later than they should or even lack of timely action by the decision-maker when they agreed to your contract. Patience grasshopper. The 2nd payment could be a lot faster.
• Lack of a PO Number. Some clients have a purchase order system. This is to prevent fraud. I've experienced decision-makers who forgot to tell me about their system, and without a PO number, I wasn't getting paid. That can be cleared up in a hurry.
• Lack of Communication for Payment Process. You have specific requests on how your client is to pay. Your client has their own requirements. If you tell them to pay by credit card, for example, they may not be using a CC but checks only. 
• Lack of Communication on Invoice Delivery. Like with the above, maybe your process is to email invoices. But their process is to only receive mailed invoices. We had one client who required I send an invoice in the mail. Other clients require I send through email only. 
• Contract Terms are Vague. Maybe your contracts could use specificity. I've seen other posters post about late payments, but turned out they never had any terms in their contracts or invoices. If the client doesn't know when to pay, that can be a problem. 
• Inclement Weather. If there's a weather event around when the payment is due, that can cause a delay in your payment. Sometimes waiting is all you can do. 
• Staffing Changes. We've had clients change staff within their Accounts Payable department and that led to payment delays. 
• Holidays and Breaks. We clean for some locations that will often take off a week or two or more at a time. Schools are a great example of this. If we're sending an invoice out mid-month in December, they may not get to it until January. 
• Financial Instability. Maybe they're going broke. I had a couple of clients face this. I could complain until I'm blue in the face but if they physically cannot pay, they can't pay. From experience, if you push too hard, they could go bankrupt on you. We pushed a law firm that owed us $15,000. Then we were served bankruptcy papers and lost it all. 

Steps to Take Before You Send the Invoice:

• Contract Terms - Make sure you are clear in your contract the date you'll send the invoice, the payment terms like Net 30, etc. (I suggest to also list the exact due date if recurring), and how they are to pay (e.g ACH, CC, check, etc.). 
• Where to Send the Invoice - Check with them to see where you are to send the invoice. While most of the time it's to your client's location, some of our clients have asked us to email the invoice to an accounts payable invoice or even mail the invoice to a completely different state. 
• Signed Contract - Make sure both you and they agree in writing through a written contract. Don't rely on a text message, an email exchange, or worse, a phone call. If the agreement isn't in writing, it never happened.
• A/P Department Contacts - Get a list of alternative people within their Accounts Payable department, so that if there's a staffing change or something doesn't go as planned, you have a backup. 
• Gifts - The accounting department is often overlooked, yet, they're the ones paying you. Why not send them a gift basket from time to time? 

Sending the Invoice:

• Be Consistent. Make sure the invoice is sent on time, consistently every time.
• Due Date. Make the Due Date a bigger and bolder font than the rest of the words. 
• Correctness. Make sure the invoice exactly matches the contract amount or terms of the contract. 
• Track it. If sent through email, track whether or not they received it and whether or not they opened the invoice. 

A week before the due date, call them and ask if they had a chance to review the invoice and ask if they have any questions. This puts you at the top of their mind and improves your odds at getting paid. 

Past Due - What to do?

• Call them. Nothing like being bugged for a late payment. Calling works a lot better than email, however, after you call send an email confirming what they told you. You want a written trail.
• Alternative Contacts. If you planned ahead, you have backup contacts you can call within their A/P department. Absent that, go up the food chain within the company's org chart. 
• Resend the Invoice. If they don't respond, then still send the invoice. Don't stop sending them information.
• Collection letter. Even if you're still working there, send a collection letter. You don't have to be mean, but you should let them know. 
• Prepare an Escape. Only you can create that red line that could be crossed if they continue to not pay. That line looks different for everyone. I'm willing to continue to work for another month before worrying about it. But to shake things up, I might cut back services, or even better, remove any paper supplies we provided. We had a school once outright refuse to pay unless we reinstalled 5 female employees of ours that worked on site. They felt unsafe around one of their staff members. After they refused to pay, we removed all of the toilet paper in that school, that we had provided. That got the convo going. In another location, a law firm owed us $15K (referenced above in the start of this post. We didn't remove any trash on a Thursday. We didn't remove the trash on a Friday. The weekend came and went and when they returned on Monday, it began to smell ripe. They finally called us back. 

Action to Take if There's No Other Option:

By this point in the process, your relationship is over. Gloves off. 

• Continue Sending Invoices. While it may seem helpless, continue sending them copies of invoices, continue calling, and continue collection efforts. Document it all. 
• Lawyer Letter. Have an attorney write up a collection letter for you. While this only has bark, and no bite, it might be the push that's needed to get your payment.
• Collection Agency. There are commercial collection agencies out there. Remember that school we cleaned that refused to pay? Once they received a collection notice, they paid. 
• Review Sites. Post negative reviews. Be honest. Post that you're a vendor that hasn't been paid. But some companies live and die by reviews and this could spur action. Offer to take the review down if fully paid. 
• Sue Them. This is the last place you want to go with this. Your state's small claims court limits could vary. Some states are $8000. Some $10K. Some more. But if you go into court and win, you'll have a judgment. Then you have to take a 2nd step to collect. A judge will want to see proof you tried to collect on your own. It's important to document your journey through the steps above. 
• Assets. Go after their assets after your judgment. This could include property liens, which means you get the money when the property settles in a sale (which could take years or decades). You can go after assets like bank accounts. 

Hope this helps someone. It's not a fun thing. I've been on both sides of the coin at some point. Not fun for either party.