In an ideal freelance world, you’d get paid in full and on time for each invoice you send out. Unfortunately, that’s not always the case. Most of us will come across a past-due or nonpaying client at one point or another during our freelance careers.
Learn how to handle payment issues when they arise by understanding what causes them, knowing your options for how to collect them, and developing strategies for preventing them from happening in the future.
What Causes Unpaid Invoices
Late payments and unpaid invoices understandably cause you a lot of stress. After all, you rely on consistent and predictable cash flow to pay your bills and plan out your finances.
When a client misses a payment, it’s not necessarily intentional or malicious. It could be for a variety of reasons. For example, your client may have missed making a payment due to one or more of these reasons:
1. New, Poor, or Complicated Accounting Processes
Unorganized, new, or overly complicated accounting processes contribute to many late payments. Changes in software, staff, financial institutions, or even email addresses can lead to even the best clients missing a payment or losing track of an invoice.
Typically, paying an invoice requires multiple steps on the client’s end:
- Receipt of the invoice
- Approval or confirmation of the services and charges
- Determining the appropriate expense category
- Making a payment
This means your invoice may change hands many times before it’s actually paid, leaving room for human error.
Although you can’t do much to influence the accounting process your client uses, you can do your best to make things more efficient from your end.
Work with your client to determine which types of invoices and billing cycles work best for them, and ensure your contacts are up-to-date and relevant. Sometimes, simply changing who you send invoices to increases your chances of getting paid on time.
2. Staffing Issues
If the person you typically send invoices to takes time off or leaves your client’s company, it may cause temporary payment problems. The staff member filling in or taking over the role may need time to adjust to the previous staff member’s processes and responsibilities.
These types of situations aren’t anyone’s fault, so it’s important to be patient and understanding. How you handle these types of circumstances will demonstrate your professionalism as a freelancer, solidifying your relationship with a client.
3. Cash Flow Problems
As a freelancer, you know that cash flow can be a real problem. Sometimes, clients may have the best intentions to pay you in full and on time but are simply unable to do so because they need extra time.
Extending a payment due date is inconvenient for you — and it may even affect your own cash flow — but there’s not much you can do outside of waiting a little longer.
When this happens, be sure to have a conversation with the client about when you can anticipate a payment and get an actual date.
If you’re struggling to make ends meet because you were relying on them to pay your invoice, ask for a partial payment in the meantime or propose a payment plan. Although not ideal, it will put some cash in your pocket in the interim.
4. Unclear Payment Terms
When working with a client, the person who wrote out your freelance contract and the person who facilitates your payments aren’t always the same. This means whoever is in charge of sending out your checks may not be fully aware of the payment terms in your contract, such as your billing cycle, preferred payment method, or due dates.
If you don’t include this information on your invoices, there’s a chance whoever receives them may not be aware of your payment expectations. To avoid this situation, be sure to include the following information in each of your invoices:
- The payment due date
- The total amount due
- Your preferred payment method
- The date the invoice was sent
- Whether late fees will be applied after a certain date
This clarifies your payment expectations and makes it easier for whoever is in charge of paying you to know when and how to compensate you for your services.
On the other hand, you may be the one who misunderstood the payment terms in your contract. Before you send a follow-up, review the terms you agreed to — especially if they were dictated by the client. It could be that you mixed up a billing cycle or overlooked a clause about payment methods.
Unfortunately, not all missed payments are due to errors or oversights. Sometimes, dissatisfied clients will refuse to make a payment because they weren’t happy with your work, regardless of the payment terms stipulated in your freelance contract.
Clients who unexpectedly withhold payment or pay you less than you expected because they’re unhappy with your work cause you a lot of financial grief.
To avoid this, keep open communication with your clients throughout the creative process and be clear about changes and revisions upfront. Ensure your freelance contract includes information about:
- How you agree to handle partially completed work
- What happens when a project is canceled
- The scope of the project
It also helps to require a deposit from new clients. If the client later refuses to pay, a nonrefundable deposit ensures that you aren’t left without any income from the work you did.
6. Poor Ethics
The worst clients are the ones who never intend to pay you at all. The best way to avoid nonpayment from unethical clients is to filter them out before signing a contract.
For example, you can:
- Require nonrefundable deposits on your freelance quotes
- Choose to only work with reputable small-business owners
- Take clients by referral only
- Use your consultation, quoting, and contract process to weed out bad clients
Before agreeing to work with a client, ask lots of questions, clearly define your terms, and set yourself up for success by using deposits, quotes, and contracts to set a professional precedent for your client relationship.
If a client refuses to pay a deposit or sign a contract, take it as a red flag and use your energy to find a better project instead.
Before Pursuing Payment
Because not all nonpayments are intentional or malicious, it’s best to check a few possibilities off your list before you contact a client. Don’t pursue a missing or late payment until you:
1. Make Sure You Didn’t Miss It
You’re just as capable of missing or forgetting about a payment as your client. Before you jump to conclusions, ensure the payment hasn’t already been made.
Review your usual payment method, check your bank account, and ensure that no other payment method was used. For example, maybe there’s a check waiting in the mailbox, even though you usually receive a direct deposit.
It’s also useful to look for any payment processing bugs or errors. For example, some payment providers send an email notification when a payment is made. But just because you didn’t receive an email doesn’t mean the money hasn’t been sent. A glitch or technical issue may be the culprit, not the client.
2. Recheck Your Invoice
Take a look at the invoice you sent to your client and the method you used to deliver it. Is all of the information clear and correct? Did you remember to attach the PDF to your email?
Use reliable methods to send your invoices, such as invoicing software, shared drives, and email. Avoid sending invoices in ways that are not trackable or easy to follow like via post or phone call.
If your invoice wasn’t sent or if it was incorrect, resend it with an apology.
3. Review Your Client Correspondence
Check emails, texts, and chats to see whether you missed an important message about a delayed payment or accounting error. The client could have contacted you already to let you know there was a problem, in which case an email from you asking for an explanation won’t be appreciated.
4. Look Over Your Payment Terms
Payment terms are typically outlined in contracts, quotes, and invoices. If you’re working with a new client, or a different staff member is handling your invoices, it may take some time for the process to run smoothly.
Review the payment terms in your contract — especially if it was provided by the client — to see what you signed on for.
Pay special attention to clauses that mention billing cycles, payment methods, due dates, and first payments.
How to Pursue a Nonpayment
Once you’ve triple-checked that the late payment isn’t already explained or due to an obvious mistake or oversight on your part, it’s time to move forward with collecting it. From basic emails to small claims court, here are some of the options you have at your disposal.
1. Contact the Client
The first thing you should do after you notice an overdue invoice is to contact the client. Begin by using the method of communication you typically contact them through. For example, if you usually have conversations through email, send a follow-up email, or if you usually communicate through phone calls, give them a ring.
Get in touch during regular business hours and give them 24 hours to respond. If they don’t get back to you, try using any other contact information you have, like calling their cellphone or office number.
Take this as an opportunity to send a friendly reminder. Don’t be aggressive or rude. At this point, there’s still a chance that the unpaid invoice is a result of a clerical error or honest mistake.
2. Reach Out to Someone Else
If your usual contact doesn’t respond to you, try contac
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