Here are a few strategies for collecting unpaid invoices
Disclaimer: This article provides general information only and is not to be used as legal advice for specific legal problems. If you need legal help contact a lawyer.
Let me preface this article with a few points. I’ve been designing and developing websites for a while now. It’s a challenging and rewarding occupation that I genuinely love. Since I’ve started building websites I haven’t run into any issues with non-payment for services – until now.
Recently a long-time client kept delaying payments for services rendered. This client eventually stopped responding to emails, changed their phone number, and refused to make good on the contracts we had together. After being patient for 4 months, I decided to explore other avenues of collection.
This was a very frustrating experience, and I assume I’m not the only web professional to come across this scenario. All of my requests for payment were professional and accommodating. However, the client never made good on several promises to pay the outstanding balance. Here are some ideas for other designers in a similar situation.
Always Act In A Professional Manner
At the end of the day a small kink in your reputation can have a large impact on your business. You don’t want a disgruntled client badmouthing your services or writing disingenuous reviews about their experience. Always pursue collections professionally and don’t make it personal. Always approach debt collection in a calm and collective manner. Be understanding of a difficult situation that the client might be facing but don’t be a pushover. Be accommodating with the debt and seek a resolution that will be beneficial for both parties.
Prevent Late Payments
There are some fundamental points that should be addressed in the initial contract you sign with clients. Mapping out these scenarios will alleviate some concerns that may arise if you need to pursue debt collection.
Have a clause that states what happens when payments are not received for a project. My clause states the final project will not be published until final payment is received. This is pretty standard from my experience. My scenario involved a long-time client, so I figured it would be okay to publish the website before they sent final payment. For clients that have been with you for some time, use your judgment on whether to release before the final invoice is paid off. I’m a trusting individual so I tend to provide flexibility with long-term clients.
Have a clause that states what happens when payments are not received for website edits or modifications. I will further address this issue later. Explicitly stating that the designer reserves the right to revert a project back to the previous state if payment is not received might save you some headaches. Many web professionals – including myself – would not implement these rollbacks, but some might. Regardless of your stance on this scenario, defining this would provide you with the option.
Have a clause that states a new contract is required if the company changes their address or phone number. This client had several businesses that I developed websites for. Since the initial contracts were drafted, they changed fundamental businesses details several times. So ideally I should have drafted a new agreement with those details. Having this clause will help when it comes to hiring an attorney or collections agency.
Have a clause that states what happens when payments are received late. I see no problem with incurring a late fee if payment is not received within one month. This may provide some incentive for clients to pay on time.
Have a clause that states the client is responsible for all fees associated with the collections process. This will help minimize your losses incurred by lawyer, marshal, and court fees.
While it can be very irritating, don’t be shy about trying to collect money that you are owed. Acting like a bill collector can be tedious, but sometimes it is a necessary chore for small-business owners. I sent reminder emails once a week – usually on a Monday. You could also try calling the person regularly or visit their office to speak with them face-to-face. Just remember to always act in a professional manner.
Offer A Payment Plan
If a client expresses that they are unable to pay a large invoice, offer some type of a payment plan. Ask the client what they can afford to pay monthly to help pay off the balance. Although this may not be what you agreed to in the original contract, at least you’ll eventually receive the money that you are owed.
If the client is in dire straits and expresses that they simply cannot pay the amount owed, then you can consider asking for a reduced amount and salvaging a portion of the balance owed. You will lose some money but not the entire amount.
Reverting Revisions Back
If you backed up website files before you began making revisions, you can always revert back to and re-publish these files until payment is received. If the client does not pay for the services you provided, then don’t publish the work. Although I did not perform this rollback, this is certainly a viable option.
One of the projects for this client involved a new website design. I could have easily taken the website offline due to a clause in our contract, but I decided to be nice and leave it alone. If you do not own the copyright to the content on the website, you could just delete the CSS for the website and all related graphic elements that were part of the design. This way the client doesn’t have access to your design and cannot complain that you deleted their content. Again, explicitly declaring this option in the original contract will protect you in a legal situation.
Small Claims: Collections/Attorney vs. DIY
If attempts to collect the debt on your own fail, your next step is small claims court. If you don’t want to deal with paperwork and courts, a collections attorney is a good option. An attorney will represent you and your claim, but for a large fee.
In my case, I have written email communications and contracts from the client confirming they owed me the money. While they made clear attempts to make this more difficult by changing numbers and not responding to emails, I was still able to gather information about the registered business through state records. I was also able to gather proof of residence through public town records.
A lawyer can also gather the correct information needed for court proceedings and represent you in court, but at a steep cost – my initial attorney wanted to take 33% of the total amount collected. I also was responsible for his court fees – which amounted to $600.
While this might have saved some time and hassle, I went the route of doing my own paperwork and representing myself in small claims court. The paperwork is straightforward and easy to manage. The entire small claims process was much easier than I initially envisioned, and the court fees where very manageable. Find out the specifics for small claims court in your state.
Collecting After Small Claims Decision
Winning a case in small claims court doesn’t necessarily mean you will get paid. Once there is a decision made in your favor, the court will order the defendant to pay back the debt in multiple installments. If the defendant decides not to comply with the court order, you will have to take additional measures to collect on the judgment. There are usually three different collections options available: wage garnishment, bank levy, or real estate lien.
In order to garnish wages, you will need to know where the debtor works. For a bank levy, you will need to know the debtors bank account details. Your last option is to put a lien on property that belongs to the individual. A Google search or visiting your local small claims office will provide you with more guidance on these procedures.More Articles