It’s every freelancer’s nightmare: you spend days or weeks on a freelance project, dedicating your valuable time, but when it’s done, the client won’t pay. Sometimes they flat-out refuse to pay for whatever reason, or sometimes they ghost you entirely.
If you haven’t run into this already, you probably will someday, but it doesn’t mean you’re out of luck. There are many ways to collect that hard-earned money (and ways to cut down on these issues entirely).
What to Do if Freelance Clients Don’t Pay
You sent an invoice with payment terms of net 30, and those 30 days have passed with no payment. Follow these three steps to collect your cash.
Step 1: Send a Reminder
If a client hasn’t refused to pay but hasn’t paid either, it’s entirely possible they merely forgot to pay you. People are busy so things get lost in the shuffle. That’s why your first step should be a simple email, reminding them of the balance and due date.
Notice that I said to send an email, though, not call them. Always put these reminders in writing in case it becomes necessary evidence later.
Step 2: Send a Demand Letter
Your email didn’t do the trick? It’s time to put more authority behind your words. Ask your attorney to send the client a demand letter. That letter should request payment again and also state that you will take legal action if you don’t receive the payment by a specified date.
Don’t have a lawyer? No problem. There are plenty of online legal services in which attorneys will attach their names to your demand letter.
Step 3: Take Legal Action
No freelancer wants to reach this step, but sometimes that’s the harsh reality of doing business. When there’s a debt, you need to collect on it so you don’t set a precedent for letting clients get away with non-payment.
There are two options here: contract a collection agency to collect the debt or sue the client in small claims court. There are pros and cons of each, and your choice may depend on the amount of the debt too.
Collection agencies charge you a percentage of the final payment, usually 25% or more. In a lawsuit, however, you’ll pay to file the claim. A lawsuit will also take more of a time investment.
A collection agency is certainly the less labor-intensive route to take. However, if the client owes you $3000 and the collection agency would keep $1000, that’s a significant loss so a lawsuit may be the better choice.
Before you decide, though, look up some specifics. Compare pricing for several collection agencies and get the details on your local small claims court too. Depending on the area, small claims court has a limit for the amount you can collect.
How to Prevent Non-Paying Clients in the First Place
The best way to handle non-paying clients is to avoid them altogether. You don’t have fortune-telling powers to predict which clients won’t pay, but there are ways to make educated guesses.
Vet Each Client
Research clients before signing on with them. Check their reviews, Google their name with “scam” to see if they’ve swindled others, and ask if anyone in your network knows about them. If you find clear evidence that they’re a legitimate business, like BBB reviews, active social media pages, and months or years of Google reviews, chances are that they’ll pay on time because they have a reputation to protect.
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Develop a Clear Contract
Contracts are essential for any freelance business from day one. In that contract, specify your payment terms, the invoicing schedule, and importantly, what happens when payments are late. You could choose to charge a set percentage of interest on late payments or specify that if payments are 30 days late, they’ll go to a collection agency.
Discuss Payment Method Options at the Gate
There’s no limit to the excuses clients make for missing payments. “It’s in the mail” is a true classic or its modern cousin, “I’m having technical issues with my Paypal.”
To cut down on those options, discuss the payment method with your client upfront. Make sure they agree to it and have used that platform before. It helps to offer multiple options so there are fewer opportunities for excuses (or fewer truly legitimate technical issues).
Use a Payment Tracking System
Every parent knows that if you let a kid get away with something once, they’ll do it again and again. Clients are the same way; never “write off” a missing or late payment because then they’ll keep up the streak.
To make sure you don’t inadvertently excuse non-payment, use a system to track clients’ invoices and payments. This lets you stay on top of it all and see at a glance if someone is behind so you can follow up and get paid.
Every freelancer has their own process and policies but considers charging a sizeable deposit upfront. The Freelancers Union suggests 50% deposits, for example, before beginning any work. Clients who plan to skip out on the bill generally won’t be willing to pay that 50%.
Getting That Money
Ultimately, you’re not a freelance late payment collector, you’re a freelance designer, planner, consultant, or what have you. The tips and strategies above can keep the money coming in and keep you doing what you love.