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blibbka

How to handle late-paying (but otherwise good) client(s)

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Hi,

 

I have a couple of clients that are in a habit of paying their invoices late. In truth, I have several clients that regularly pay a couple of months late but as the fees involved are usually quite small I don't get too vexed about them.

 

But one particular client usually pays their invoices between 1 and 2 months late (and even then only after me repeatedly chasing). The invoices involved are moderately large - roughly 1/2 to a full months' income.

 

They do always pay in full in the end, and are otherwise an okay client, who has provided a pretty steady stream of work over the past 4 or 5 years. Yet I am not reliant upon them and have recently turned away some nice projects because I'm busy on their stuff.

 

A couple of months' back a large invoice was unpaid a couple of months down the line, despite repeated reminders. I contacted them to say that I was unhappy with this and from now on all invoices would be due upon receipt and should any invoice be 30 days overdue I would halt work until it has cleared.

 

The business owner and my marketing contact there were both apologetic and said they'd make sure it did not happen again.

 

Yet, this month, the same situation. Because (mostly) of the late payment of this invoice, my business account became overdrawn. As there is no work ongoing with them at this very moment, I can't "halt" work.

 

I am wondering what my next step should be.

 

I'm considering:

  • An ultimatum: "I am a small independent business. If you want me to continue working with me I need invoices to be paid within 30 days. If you are not able to do that then - with regret - I will have to stop working with you. If that is the case then I'll send a final invoice to settle the account and provide you with backups of all work completed to date."
  • From now on, all work must be prepaid: "So from now on we will work on a retained basis. I suggest a monthly budget of £xxx. You will transfer this to me by monthly standing order. When the budget is used up I will stop work. We can increase or decrease the retainer amount according to needs, however it does need to be paid monthly and on time."
  • Bite my tongue and continue chasing!

 

Thoughts?

Edited by blibbka

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Hmmm, tricky one clients and invoices, some of my clients pay withing 2 hours of invoice, others sound just like your little pains ;)

 

For my 'problematic' clients who fail to pay invoices I tighten the reigns. If it's a big bit of work I invoice half up front and when it's prepped and ready to go I send out the invoice on 7 day terms with a note the work will 'go live on receipt of payment' which normally gets them into gear and pay. It's hard to do however with adhoc stuff but if it's only little bits and bobs I will let them clock up a small bill before invoicing, nowhere near 1/2 a months money, maybe a day at the most, they fail to pay and it's no big deal to chase if you can be bothered, but if they don't pay inside 3 or so months I consider them a dead client and forget about them.

 

One important thing, always prioritise good payers work over these problem clients, and if a new client comes along which keep on top of bills (e.g. pays the deposit within a few days) then bump the problem clients down the priority list, if they don't like it they will either leave or pay on time.

 

Edit: Sorry forgot to say, my approach right now would be to call either the business owner or marketing contact, whoever you got on better with. I'd explain about the outstanding invoice that it keeps getting later and you cannot work like this. I might even ask if their business is in financial problems and would they like a payment plan. This will either embarrass them and they'll pay or they really are in financial problems and can set up a payment plan. Either way I would call and not email about it, maybe follow up with a summary of what was said cc the other so everyone knows about it.

Edited by BrowserBugs

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Thanks BrowserBugs.

 

A phone call is a good idea - all too easy to ignore emails and I'll get a feel for the true situation from their response. Also like the idea of asking if they're in financial problems. They have the appearance of doing well - but that could be deceptive.

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They have the appearance of doing well - but that could be deceptive.

 

It can be they are doing well but have a cash flow issue. I find generally speaking my problem clients all seem to come from the property trades. Their problem is always cash flow; for example say they take on a construction and landscape project. They normally have all their available cash stuck in bricks and cement, and until the project is complete they are broke regardless if they got £100k in profit on its way, and that's if their client pays them on time.

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