What Should I Do If Someone Delays Payment? Or Refuses To Pay?

December 06, 2016

What Should I Do If Someone Delays Payment? Or Refuses To Pay?

First let's consider delayed payment. I don’t know of anyone in the consulting business—or in any business—who this hasn’t happened to: The invoice is due, you’re waiting for the money to drop into your account or a check to arrive in the mail. And you wait and you wait. So you follow up with the client and typically you’ll face one of four scenarios:

  • Administrative problems. The company has “lost” your invoice or thought they’d already paid you or used the wrong payment code or … In this case, they want to pay you, but, hey, mistakes happen. Or they’re just inept. Whatever reasons you assign and however frustrated you are, it’s usually easily rectified.
  • They’re unhappy with the invoice and didn’t bother to tell you. You miscoded it, didn’t put it in the right form, got the project reference wrong, or something else. Simply apologize, submit a correct version, and mark your cash-flow problems down as “Hey, mistakes happen” or your own ineptness.
  • They’re unhappy with the invoice and didn’t bother telling you because they don’t think they owe you that much, or they refuse to pay for the seven cups of coffee you charged to the project last Tuesday or … Talk to the client. Go and see them if necessary. You have to get to the bottom of this one. In my experience, as long as you’re prepared to be reasonable, a compromise can usually be reached.
  • They keep saying they’ve passed the invoice for payment and it’s in the payment process, but the cash never appears. This is the scenario where alarm bells should start ringing for you. They appear to be stringing you along, and you’re probably doing additional work for them as time rolls by, possibly putting you into a bigger loss situation. In this situation, stop work on the project and set that down formally in an e-mail to your client. State also that project deadlines agreed in the proposal will now no longer be met. Also ask for a meeting with your client. I experienced this and found out the company was suffering cash-flow problems. If you have the feeling that this might be the case, when you go into the next project, my advice is to demand your fees up front.

Now let's consider someone refusing to pay you. Hopefully you face this situation very rarely, if ever. Delaying a payment is one thing; flat-out refusing to pay is another. If your client is uttering those words, things have gone badly wrong and should never have reached that stage.

Once this happened to me. I set up and signed a contract with a medium-sized consulting company. The CEO of the company also signed it. Basically it consisted of a finder’s fee percentage for work I brought to the company plus a deal on projects that I worked on with the company. All was fine until I found them a $50,000 project and claimed my finder’s fee. At that point, the CEO refused to pay, saying that he should never have agreed to the fee. I pointed to our agreement, and he still refused. And so on and so on. Eight months later, I got the money out of him after pursuing legal action. I’ve never worked with him or his company since, and I never did find out what the problem was.

So if you’re unlucky, this can happen.

If a client just simply refuses to pay and won’t compromise, listen to reason, or respond to your multiple payment demands, you have two (unpleasant) options:

  1. Write it off as bad debt. Of course, this depends on how much it is and what you think your chances are of getting paid eventually. I know this seems like giving in, but think about the time, effort, and stress that you will incur trying to get that invoice paid. Would you be better off conducting or pursuing work with someone you can work with?
  1. Take legal action, starting with a lawyer’s letter and escalating from there, if needed. If you choose this option, weigh the associated costs, the likelihood of a favorable settlement, and the stress and anxiety involved.

Finally, if a client chooses not to pay you, never ever work with them again. Not even if you eventually get your money.

Getting paid is critical to us all. I'd love to hear your comments.

 

As a highly experienced consultant and author of “Consulting Made Easy”, Adrian assists consultants, or would be consultants, to achieve success on their terms in their own consulting businesses.  Adrian helps consultants increase their fee rates, find more clients, have more free time and have more fun.
Contact Adrian at
adrian@adrianpartridge.com to learn more.



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