

Ask HN: How do you handle client that keeps on delaying invoice payment? - varunkho

The client seems to be always delaying the payment to the point I have to pull the plug and then he immediately pays. However, I don&#x27;t like to stretch that far every time. Sending the email invoice reminder does not seem to work.
Do you frequently face such a situation; if so, How do you handle such clients?<p>I have few ideas in mind (do you use any of these?):<p>1) Levy a penalty for not paying on time.<p>2) send phone reminders
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dorfuss
I work in a collection company. If you want more detailed help please let me
know. Firstly: you have to legally secure your payment in case your client
makes problems in the future. That means a written contract that specifies
what you do, when and when he pays. This should be signed by your Client,
clearly in full name and company stamp.

In the contract you include interests for non payment (there are limitations -
depends on the country). You should give him bonus for paying on time (eg. 5%
off).

Give a short time for complaint - include a clause that if no complaint is
officially filed the service is deemed accepted.

Ask the Client to give you a confirmation when he receives your invoice, and
when your service is performed/received. Keep track of everyting you do for
him and confirm in writing (e-mail is enough) that he accepts it.

Please NEVER trust anyone - I know small family businesses with over $100K of
unpaid invoices. Trust is good, but everything changes when you realise you
were screwd and did nothing to prevent it.

Practice shows that calling every single day is an efficient motivator. Your
Client probably delays payments to others as well, when you bother him a lot
you'll be the first he pays to.

Give deadlines and keep them. Ask him always to pay today, not tomorrow, not
by the end of the week. Escalate sanctions. If you shoot all your weapons in
the beginning, you will have nothing to say to him later. So first tell him
that if doesnt pay today, you will remind him every day. Then tell him that he
lost his bonus, then that you will charge interests, then that you will stop
the service, then that you will contact a debt collection agency/lawyer.

Ask him to make smaller partial payments (could be use in court as a debt
acknowledgement.

Be always mentally/financially prepared you'll not receive these payments at
all. And act fast, statistics show that succes rate drops dramatically when
invoices are older than 6 months.

Cheers!

~~~
varunkho
Thanks! This is good advice. Btw, if I have a written signed contract in place
and if the client does not pay and I'm outside US, is it possible to hand over
that case to an entity (like collection agency) in US to take care of?

Edit: Also, is there a standar contract template for a vendor/contractor that
lays down these conditions in legit manner. For instance, how much interest
you can legitimately charge for each day delayed ETC. Just curious.

~~~
dorfuss
Yes, it is possible to entrust a company which will take care of that
remotely. I believe most international debt collection agencies work this way.
It doesn't matter where you are. Let's say you are a French company and you
sell to Japan. You don't know Japanese. You go to a big collection firm, you
are served in French, but the particular collector is sitting in Tokyo, knows
the law there, the language, and finds the debtor and gets the money for you.

Usually there would be a small set-up fee ($50-100) and commission fee for
successfully collected moneyes (8-25%, depends on the debtor's country).

Today everything is done on-line, so you don't have to actually be there.

No standard template, sorry ;) Everything depends on the country/state. Btw
that's what lawyers are for :) Over here it's 14% a year by the law itself,
you don't have to mention it in your contract/agreement, but also you can
agree on more/less. However it cannot be 1000%, because it's against the Civil
Code. In some countries you can also collect the "collection costs". In some
other you cannot. No simple answer.

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gesman
No penalties. Diplomacy. Forcing penalties is acknowledging that you lost.
Lawyers love that everyone-lost-lawyer-wins attitude.

The best way to adjust client's "too-busy-for-me" attitude is to push client's
weak spot.

It could be delaying deliverable (until fully paid), it could be disabling
features (until fully paid), it could be threat of blogging about client's
ability to pay (scares the shit out of clients who are thriving for public
impression of success), it could be requirement to pay upfront 50%-100% of
contract cost.

The key is to be subtle but clear without threats or pressure by presenting
your game as business as usual, giving client clear and easy way to solve all
issues by paying.

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hcho
If the client is consistently behind payments, I leave them at the first
opportunity. If I were you I would focus on creating those opportunities.

~~~
varunkho
I Don't think that he does not want to pay – because his major part of the
business depends on that application I created and manage for him. So my ask
is to use a tactic that makes him pay on time without creating bad impression
for either of us.

~~~
redtexture
You have the potential leverage of an active relationship, where you do work
they need for an important application, and thus have joint and mutual
interests to continue on a active and healthy mutually agreeable basis.

Through all of your DAILY actions and communications directly with the person
who makes the decision to pay, you are able to be devoted to re-establishing
the healthy mutual interest of your client towards you. It's a person-to-
person relationship, and it is a person's decision to pay you, and to maintain
the relationship with you on acceptable terms. Talk to them on the telephone;
email reminders are not enough.

Your repeated and daily, person-to-person statement of expectation and
requirement that the client respect the relationship, and the reciprocity of
the relationship, and your terms may be successful. Ultimately, if you are not
important to them, they are not important to you.

One perspective: let them practice, for a week or two via these daily personal
communications, where the daily opportunity to make good on the commitment and
recognition of your importance, whether in daily partial payments, or a
payment in full is a daily decision on their part that you are in active and
personal communication about.

Eventually comes the point of time, after this ragular and daily
communication, and the daily decisions on their part, for you to make clear
that no work will be done until the invoice is brought up to date, and paid in
full, and furthermore, that all future work will be conducted on a different
basis that you establish that does not allow any payments to be delayed in any
instance, as the client has demonstrated by action, and daily decisions, that
you are not important to them. Invite them to commit to your being important
to them.

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hellweaver666
Explain to him that his late payment is causing you difficulty. Make this very
clear.

Then, refuse to start new work until the previous job is paid up (or... insist
on payment in advance).

This will result in you either getting paid on time (or early), or the client
going elsewhere.

Either way... the problem client is solved.

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jason_slack
I had a client that was most always 2-3 months behind paying me. I simply laid
it out for them. I need to get paid or I cannot support my family. I will also
have to take on other work to make ends meet. I was just being honest with
them. Nobody is going to look out for me, but me.

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cheatcode
I signed on to HN just to answer this question (I've consulted for 8 years).
If you continue to allow this "client" to treat you like a beggar pleading for
a crust of bread, it is YOUR FAULT, not his.

From now on, get full payment in advance. Explain to him why. Give him the
truth.

Contracts are often more trouble than they're worth. You need leverage. If you
have that, use it. And refuse to do any more work until you're 1) paid in full
and 2) paid in advance.

If you don't do this, your problems will continue and you will have no one to
blame but yourself.

