Etiquette in dealing with a non-paying client?

Etiquette in dealing with a non-paying client?

This is a real scenario for my "day job", which is not photography, but could apply to photography businesses as well. I am an engineering consultant and contract my services out to other engineers. I take the job, and bill once or twice a month, depending on what the client and I agree on.

I got a new client in June. Was a quick project, that could lead to a longer project if the original work is accepted by their client. I did the work and sent an invoice at the end of June.

Nothing.

July comes and passes. I sent a friendly e-mail inquiring about the status of the project being continued. I get a friendly reply that it is still in process and undetermined, but he'd let me know when it breaks loose. I sent a follow-up invoice the next day.

Here it is almost two weeks later... and nothing.

I know that many companies pay bills once a month, but if this firm does that, then that day has easily come and gone at least once since I sent the first invoice.

Should I call and/or e-mail and ask directly where my payment is? On the one hand, money is tight and I need to pay my bills. On the other hand, I don't want to annoy them and risk losing a client. On the third hand, are they worth having as a client if this is their M.O.? Since they are a new client, I don't know if this is their M.O., or just an aberration.

Thoughts would be most appreciated.

Here is a video that i found that realy expalins how to handle these situations, It has helped me get paid on a number of ocassions where people just ignore you asking for your money

http://vimeo.com/22053​820

LONDON808 wrote in post #14862898
Here is a video that i found that realy expalins how to handle these situations, It has helped me get paid on a number of ocassions where people just ignore you asking for your money

http://vimeo.com/22053​820

Watching it right now. Thanks.

Very good, and very informative video.

im in the middle of the video now. at my infant stage of the work I currently do, this video clarifies so much that i have read here and there on this forum. watch it!

This video is awesome!! And so true!

photoguy6405 wrote in post #14862886
On the other hand, I don't want to annoy them and risk losing a client.

Why would you want/need a client that doesn't pay you?

The correct etiquette: be specific/precise and be professional.
1. Before starting the project agree payment terms. - Invoices are due on receipt, unless other payment terms are agreed. However, many companies want/require 30, 60 or even 90 days credit, and will default to this if you don't clearly state what your payment terms are.
2. Once a payment is overdue don't tiptoe around the issue. "inquiring about the status of the project being continued" isn't going to make a client remember to pay you. In fact your contact may have no idea that the invoice isn't paid - it could be the account department's fault.
3. Phone your contact and in a friendly and polite manner and let them know the payment is overdue. If they can't chase the payment and confirm when it will be paid while you are on the phone ask them to call you back that day to let you know when payment will be made (set a deadline).*
4. If the payment promised in (3) doesn't arrive send an account overdue letter (send it recorded/registered). Address it to the accounts department and keep it strictly formal/professional. "Dear Sir, according to our records invoice number [Blah] in relation to project [XYZ] was due on [date] and at the time of writing no payment has been received. If you have recently made payment please disregard this letter, otherwise we must ask that payment is received no later than [a date 7 days from the date of the letter]**
5. If the client promises to make payment and then doesn't, or they start dodging your calls/won't answer emails/voice messages your next step is to choose between a debt collection agency or court (small claims if the amount is small enough).

General points.
Companies fail to pay for three reasons.
i. Someone screwed up.
ii. The company is balancing their cash-flow - getting paid as soon as they can but delaying payments to keep their cash-flow positive.
iii. They have serious financial difficulties.

For (i) a timely reminder will get the problem sorted. Not chasing will just result in the lost invoice never being found/paid. For option (ii) chasing payment will make accounts realise that you aren't a credit free loan company and they will pay your invoices in order to have a quiet life. Not chasing will make them think you are a soft touch and they will delay all future payments. In option (iii) chasing in a timely fashion will make the difference between getting paid late or not at all. If a company goes bust (very possible in today's economic climate) the only person who will get paid is the appointed Administrator (and possibly the tax man).

Maintaining client relationships.
Obviously you don't want to piss off a client just because someone misfiled your invoice. The best way to manage your relationship is to stay on friendly terms with your contact wile sending all official letters to the accounts dept/senior management. Phone your contact and ask them to "help chase payment" - this makes it feel as if you don't blame them.

* Your client has no legal right to delay payment. If your contact says "the cheque will be sent out Friday" (3 days time) or "all the Directors are away until Monday so we can't cut a cheque until the following Friday" then that is probably acceptable. However if they say "we will pay next month" that isn't. You are within your rights to demand payment be made within a reasonable time-frame (7 days).

** In business you need to be seen to act reasonably. If there is a problem with the work you do your client can't simply cancel the contract. They have to inform you of the problem and give you a reasonable chance to remedy. Likewise, if there is a problem with payment you need to inform them and give them a short but reasonable time to remedy. Being unreasonable may count against you if you later have to go to court to chase payment.

LONDON808 wrote in post #14862898
Here is a video that i found that realy expalins how to handle these situations, It has helped me get paid on a number of ocassions where people just ignore you asking for your money

http://vimeo.com/22053​820

Great seminar, and funny too. The other videos seem interesting to me too.

Good points. Some more info (just clarifying)...

Dan Marchant wrote in post #14864151
1. Before starting the project agree payment terms. - Invoices are due on receipt, unless other payment terms are agreed. However, many companies want/require 30, 60 or even 90 days credit, and will default to this if you don't clearly state what your payment terms are.

The contract was supplied by me. The payments terms are simple and straight forward... payment due within 30 days of the date of the invoice (before late charges kick in). The first invoice for the June work was dated and mailed July 2nd.

Side note: I will be adding verbiage regarding collection costs per the video link above for all future contracts.

Dan Marchant wrote in post #14864151
2. Once a payment is overdue don't tiptoe around the issue. "inquiring about the status of the project being continued" isn't going to make a client remember to pay you. In fact your contact may have no idea that the invoice isn't paid - it could be the account department's fault.

My inquiry e-mail was August 6th (I was out of town the 1st thru 5th). True, he may have had not known, but I sent a follow-up invoice the next day, the 7th, so he knows now.

Dan Marchant wrote in post #14864151
General points.
Companies fail to pay for three reasons.
i. Someone screwed up.
ii. The company is balancing their cash-flow - getting paid as soon as they can but delaying payments to keep their cash-flow positive.
iii. They have serious financial difficulties.

In this case, it is one office in a 3-4 office firm, and when I met them at the beginning of the project they were just beginning to expand their office by 1600 s.f. into adjoining empty space, so I think I can cross financial difficulties off the list.

Dan Marchant wrote in post #14864151
Maintaining client relationships.
Obviously you don't want to piss off a client just because someone misfiled your invoice. The best way to manage your relationship is to stay on friendly terms with your contact wile sending all official letters to the accounts dept/senior management. Phone your contact and ask them to "help chase payment" - this makes it feel as if you don't blame them.

* Your client has no legal right to delay payment. If your contact says "the cheque will be sent out Friday" (3 days time) or "all the Directors are away until Monday so we can't cut a cheque until the following Friday" then that is probably acceptable. However if they say "we will pay next month" that isn't. You are within your rights to demand payment be made within a reasonable time-frame (7 days).

** In business you need to be seen to act reasonably. If there is a problem with the work you do your client can't simply cancel the contract. They have to inform you of the problem and give you a reasonable chance to remedy. Likewise, if there is a problem with payment you need to inform them and give them a short but reasonable time to remedy. Being unreasonable may count against you if you later have to go to court to chase payment.

These make sense. To be honest, part of the reason for my inquiry e-mail was to gauge possible dissatisfaction. Not that that woould have changed anything, except maybe then I would have had a better idea how to proceed. I didn't detect any dissatisfaction, for whatever that's worth.

By phone works better than by email, and face to face works better than phone.

photoguy6405 wrote in post #14864267
.....In this case, it is one office in a 3-4 office firm, and when I met them at the beginning of the project they were just beginning to expand their office by 1600 s.f. into adjoining empty space, so I think I can cross financial difficulties off the list....

Unfortunately not. Some people who are growing their business will deliberately pay suppliers late (or even not at all) as another means of financing the expansion. Basically, they are using suppliers' money in order to reduce their own borrowing or capital requirement. Even operators of profitable enterprises will do this as an ongoing, deliberate business strategy. From their perspective, it's great for cashflow.

I had this happen to a company I worked for some years ago. I estimated that, at any one time, they owed their creditors around $1.5M, some of which was over 90 days late.

It's free money.

With photography, I receive final payment before turning over the files.

Photog guy, given that the bill wasn't due until the end of July, i would say you are still in the territory of it not being considered late by the company. What a lot of companies do is register the invoice as the due date and then make the payment on the check run after the date it is due. This maximizes the money the keep on hand. Some companies default to 45 days or more as standard payment terms. The invoice may say 30 days, but if their standard terms say xx days then guess what. The accounting department normally doesn't have a copy of the signed contract.

mikeinctown wrote in post #14865871
Photog guy, given that the bill wasn't due until the end of July, i would say you are still in the territory of it not being considered late by the company. What a lot of companies do is register the invoice as the due date and then make the payment on the check run after the date it is due. This maximizes the money the keep on hand.

+1 to this.

mikeinctown wrote in post #14865871
Photog guy, given that the bill wasn't due until the end of July, i would say you are still in the territory of it not being considered late by the company. What a lot of companies do is register the invoice as the due date and then make the payment on the check run after the date it is due. This maximizes the money the keep on hand. Some companies default to 45 days or more as standard payment terms. The invoice may say 30 days, but if their standard terms say xx days then guess what. The accounting department normally doesn't have a copy of the signed contract.

Are you pointing this out as a possible explanation, or are you suggesting that I be patient and wait longer?

If the former, I don't dispute that you may be right. I am aware that some companies do this. Not all, but some.

If the latter, I'm not so sure that signing a contract with no intention of ever actually honoring said contract is defensible. The contract was signed (and read, I watched him read it) by the office manager/primary engineer. Every similar office I have ever worked in, said person was fully aware, at the very least in a general sense, of how their company paid bills, etc.