One of the most common problems businesses face when they are in the ascendance is the issue of money. Money, in all of its forms, is an incredibly frustrating pursuit, especially if you've got clients who don't pay up. This is, unfortunately, a widespread occurrence. You would think that when clients demand services from your business, that they would pay promptly. It seems that, more often than not, there are considerable problems at stake when a client doesn't pay up. Not only does this damage your business, so you struggle financially, but if that client is a reputable one, and even more reputable than your company is right now, it could sour your reputation, even though they are being the difficult one. So many startups face this problem on a constant basis. For those who are struggling to get clients to pay up, what are the best approaches to dealing with this?
Stay Calm
Yes, the temptation is always to rattle off a very strongly worded email, explaining that how worse off your businesses for them not paying up, but this will likely fall on deaf ears. For any business leader that's trying to find their feet, it's important to stay calm and focused. Yes, your clients might not have paid right away, but are there reasons behind it? The temptation could be to explode on social media and shame this client personally, but this is a very passive-aggressive, and, even worse, childish manner in which to get your own back. Instead, remain cool and calm and be consistent in your contact. If you're running a business, and you feel you lack the leadership skills necessary to deal with a client, remember, this is something that happens all the time. Focus on your communication with them, and always keep it professional.
Don’t Let It Affect Your Staff
Morale is, undoubtedly, the biggest proponent of productivity in business. And if you've got a roster of staff relying on you to pay them at the end of the month, but you haven't got the finances right now, this isn't going to have a positive effect on the well-being of your workers. The issue of business cashflow is your responsibility, and if you find yourself with this issue consistently, through a range of clients, then there are options for you. Invoice factoring is one such option where you can sell your invoices to a third party, and they do the chasing. This benefits you because you can pay your staff and you won't be out of pocket. For those in a startup where money is incredibly tight, the stress of having a client not pay up is something you shouldn't pass on to your employees. It's your responsibility to handle it.
Maintain Contact With The Client
If a client doesn't pay up, kindly keep in contact with them. Either call them daily, leave voicemails, or send emails. The best way to apply pressure is to increase your frequency of contact. So, if you start off by the non-invasive methods, such as email, and you hear nothing in a 24 hour period, you could follow this up with a more detailed email, and a phone call to inquire if they got the email. If you are hitting a brick wall, and getting their answer phone, begin to call them daily. It can be a cheaper option before you get collection agencies involved, and it can be a lot less hassle. It doesn't feel like it at the time, but it's worth the effort, especially if it's a large sum of money.
Go Down The Legal Route (If Necessary)
This can be a lot of hassle. But you don't necessarily have to go down this route, but you can hint at it in your contact with the client. This is usually threat enough to force them to pay up. No client likes to have legal action put upon them because this is going to damage their reputation irreparably. And while this option is the last chance saloon, if it's got to the point where they are refusing your threats of legal action, the next step is to send a letter from an attorney. Prior to going to a debt collection agency, it's advisable to consult with a collections lawyer. Because it's cheaper for a lawyer to draft a demand letter, it will hopefully save you some money, and will get you a quick response. Your other option would be to go to the small claims court, but the costs vary in relation to where you are in the world. And it's at this point you need to consider whether this is a viable option or not.
Ask If It’s Worth All This Effort
If you choose to go down the small claims court route, it's something that could take a long time to fix. It's at this point where you need to weigh up whether the amount they owe is worth your time and effort. You need to consider more than the fact that they owe you money. You need to consider your business image. If you develop a bad relationship with this client, is it going to affect your relationship with others in the future? If they have more sway than you, it could end up solidifying you as the bad client. If you're a small business, and you need to get as much traction as you can, if you end up creating enemies, especially in the first few months of your business, you will struggle to keep afloat. This could mean you going the way of many startups, and shutting up shop before you've even had a chance to take off. We all need to know when we have to cut our losses, and while money is an overriding factor, ask yourself, is it such a huge amount that it's worth fighting for? When you think about the costs for a small claims court, if the outcome doesn't go your way (which it can do on occasion), then you will be even more out of pocket!
Make Sure This Doesn’t Happen Again
If we have one bad relationship with a client, what can we learn from this? There are steps you can take to ensure that this doesn't happen again, such as tighter controls around the tasks, but also, it's beneficial to implement a few caveats in the contract. One common option many freelancers implement now is late payment fees. This is a preventative measure that will come in handy, especially if you've done the work to a deadline. You could also add interest to these late payment fees, to show you are serious. When it comes to dealing with the clients, you need to put in as many preventative measures as possible. With a legally binding contract that leaves no stone unturned, they don't have an option to back out when they don't deliver payment. The other backup plan you should have in place is your insurance policy. If you do end up going down the small claims court route, if you have an insurance policy in place to cover legal fees, this is going to show your clients that you are a force to be reckoned with, but you've also got the goods that won't bankrupt you.
It's a very frustrating process, but it's not just about the payment that you need to consider. To benefit you and the client, communication is one of the most vital components of solidifying a relationship. Yes, while flexibility is important, communication, when it comes to the task itself, is vital for both parties to be happy. Sometimes, a client refuses to pay up, it transpires, because they were dissatisfied with your work. Instead, showing constant and consistent communication throughout the process means that you will both be happy and on the same page. Communication is one of those things that falls by the wayside when it comes to getting a task completed by a tight deadline. We are focused on getting this task completed as quickly and efficiently as possible, but we ignore the briefs or don't do it to their standards. So from the perspective of a client who refuses to pay you for a task you completed, it's your responsibility to make sure that you have a handle on the duties. And from the other perspective, if you hired a client to complete a task, you need to make sure that you are as detailed as possible in your instructions.
A client not paying up could spell disaster, and for those startup companies who need every penny they can get, it can leave you at a disadvantage when you have someone refusing to give you the money you so desperately need. Yes, it can be one of the most frustrating things to ever go through, but this begs the question, are they the right client to begin with? We spend a lot of time working hard at acquiring clients, and sometimes, desperation means that we have to take what we can get. But surely, it's better for you to have a good caliber of clients, rather than settling for what you can get? This is a very salient business lesson we can all learn from.
