What do you do with clients who don't pay up on time?

With the nature of businesses worldwide at the moment unfortunately you'll always get some clients struggling to pay. I think you need to either build in possible lost costs in the first/front end payment or have a system that means you can stop the work and possibly lock the client out.
Of course you can sue a client but in the UK it can take months to come to court and even if you get a judgement in your favour it may still be difficult, costly or impossible to enforce.

Rich

It depends on what you sold to them, what you are currently doing, what your relationship is like, what kind of results your services are generating...etc

But, to answer you more specifically...
Shut them down until payment is received, after 30 days... that's it. I am done with them, it's not my job to chase them down for payment. They pay or don't play.

In the end it all comes down to positioning and relationships.

However....
If you do SEO, you may not be delivering enough results or your client may not be able to sell the customer once contacted
If you sell websites, then you should have been paid for the site already. So it's a matter of hosting. If they can't afford a small hosting fee... either let them go, or give it to them for free
Depending upon your relationship with them
Etc....

It would help if you said the service you were performing for them and what your relationship is like.

I do all my billing monthly in advance and stopped taking checks. I do all my billing through credit cards. I integrated a credit card authorization into my service agreement, so I capture the terms, services provided and cc authorization all on one document.

I never had a problem collecting, but rather my problem was cash flow. When you take checks, money trickles in all throughout the month. It's tough to manage cash flow when that happens.

With credit card billing, the first of the month you run all your billing and that's it - you're done.

I do have a couple national companies who MUST pay with a check because of company policy. If the client is big enough, I'll do it, but only if it's a big win...

All of last year (2011) I believe I had one non-payer. After follow-up through the mail and phone calls, I just took the site down temporarily. It was only a matter of a few days before one of the owners called and promised to send monies due.
Yes, he was annoyed, but he knew I had done everything I could before taking that
action.
_____
Bruce

Bredfan is spot on. Bill in advance only. No invoices, no checks, no billing just a direct charge to their credit care. If it's a big company and they pay on time then a check is OK. The problem with big companies and checks is they like to play cash management games and stretch people out to 60 and 90 days.

Also, keep ownership of anything and everything you can. They don't pay, stop the work or take back ownership of the what you have done. I agree that the SEO issue can be a problem, if there are different expectations then these things crop up. But folks that do the nonsense Kunle talks about should be cut off immediately. Make 'em pay a restart fee as well ;-)

Kunle, I certainly know this frustration from other businesses. In offline I have only had one guy not pay so far and I am 5 seconds from taking down his site and posting a notice. You can have all the contracts in the world but to collect you may have to ultimately sue a party and even then how the heck are you going to get your money? You can then spend more to have the police seize their property and sell it off but by then unless you are in it for maybe $10K you are never going to see a dime of that money...especially in this economy. You cannot likely take their person property as it is protected behind a corporation. I have worked with and for many many attorneys and dealt with deadbeat tenants many times and I can tell you the likelyhood of you sueing and collecting is near zero.

However, saying that sometimes you can scare a client into paying. My usual trick is to send one last invoice with a small claims court filing filled out but not registered and a letter saying you will file it in 3 days unless payment is received.

Unfortunately in the economic climate we live in we are going to deal with this situation more and more and the only honest protection against this is to have enough clients to offset these setbacks. It usually p!sses me off when we are tight on cashflow and then it just irks me you do all these services for someone and they dont say a word about problems till the bill comes.

Great advice all round. With reference to using credit card processing, is there any off the shelf solution for managing seo clients?

The hosting is paid for, just leave it up, you cant make any money taking it down...

Encourage them to pay and catch up as soon as they can...tell them youn understand hard times...Use their situation to ingratiate their loyalty even further, until as Bruce says, you cant go any further.

You lose nothing leaving it up, but you may lose something taking it down. An opportunity to make your customers love you even more and say good things about your service and the kind of business you do!

A chance to work with a customer and make them feel understood. That grows your business exponentially and virally as word of mouth spreads.

Again, what do you gain taking it down if the hosting is paid for the year?

Ps. In the end, if this goes on for months and they rack up a bill with you and say "I cant afford to catch up my debt", then free them from it and say "We will just start back at month by month and forget the past". You have nothing to lose and alot to gain.

Start busting some knee caps and the word will get out to pay you on time

Nice posts all round everyone! Thanks.

Unfortunately I'm typing from a hospital bed with a needle in my right wrist so can't respond as much as I'd love to to each person, maybe I'll come around and do that much later.

For now, this is really gold. Thanks to every single person who posted, don't feel so alone and guilty about reacting to these types of so called clients who can't honor a simple agreement and even blame you for trying to collect what is essentially and legally yours.

I think what I'll do is...

1) Draw up a payment schedule SEPARATELY so that is very obvious right at the beginning. i.e. It becomes a table that you tick off everything they have so far paid for.
So if you're rendering web design, hosting, advertising etc, you give them a break down of prices and tick the ones that have actually been covered by their first payment of say 50% - 70% then it becomes obvious what they are owning for.

2) Discuss specifically about payment and when it is expected and get them to say then and there if they will need your 60 - 90 day postponed payment structure or if they are ready to settle on the agreed date of finishing the project. Or at least tell them the option is available and they can request it now or at least 1 week after payment is due. If you have to issue a delayed payment period at that point it will only be available for 30 days.

3) Make it clear that there ARE late payment fees that will be attached after agreed upon periods as you have suppliers who need to be paid up front or within X period which if it is exceeded only forces you to run at a loss due to their inaction.

4) Like John Durham pointed out, I may not revert to taking the site down etc, immediately but will consider doing this after 90 days of non-payment. Will ponder this one.

5) Lastly as Bredfan stated... I've also been considering taking payments via CC for certain amounts and depending on the company. If not for anything it does show a bit of class and since we're in the business of ecommerce we should really be using such strategies as well to prove that we walk our talk. I will contact a merchant account company here locally as receiving payments with the usual international means paypal etc etc are unlikely to really fly well here in Nigeria but I'll surely be looking into it for certain amounts and certain types of clients.

I will also let existing clients know who have to pay recurring fees that they should do it online etc etc as we have a new company policy for a cashless stress free way of making and taking payments, yada yada.

Ok... pretty long post, that needle in my wrist is hollering at me to zip it right about this point

Thanks again for ALL the responses. You guys really came through.

Cheers

Kunle

Great share of ideas, i also have experienced one before but we have included on our policy that after a grace period of 3 days yet no payment has been made then we have to shut their site. Since they agree to that then you're authorized to do that.

Nice share...As a newbie i have learned a lot of things from the experience sharing.These post gives me enough information which will help me in future.Thanks to all.

Hi Kunle,



I am sorry to hear your story. In any business there would be people trying to get out of paying. Most businesses go through this problem every now and then.


The best thing to do is to call up your client and ask them how they are doing. I won’t rush in and tell them that they should pay their remaining balance.Then gradually find out how their business and finances are going. Sometimes people are too ashamed to tell you that they can’t pay up for the services you’re giving them because it kinda lowers their value.So talk to them and start building rapport just as when you did the first time you talked to them about investing in your services.


The moment you find out that they can’t pay for your services, ask them why. If they tell you that they don’t want your services anymore then that’s it. Thank them for doing business with you even if for a short span of time.


If they still want to avail you of your services but they can’t pay you in full at the moment, then try to work out a plan where you can help each other. Just make sure it’s a win – win situation.What this does is create a better relationship with your clients and at the same time improves your personal brand.


Who knows, because of this simple act of kindness, they may refer you new business. Of course there are ways that these things could be avoided altogether. One of those ways is by having a contract in which both parties should agree and sign up.


So if the late payer tries to get mad, you could always tell them that they signed up a contract giving you the authority to stop your services.


I hope this helps,


Nick

Having this conversion with clients is always uncomfortable, but necessary. Unfortunately, not all small business owners are awesome at paying bills on time and you will have this problem if you don't set people up on automatic payments from a credit card or bank account. However, the fact is that some/most business owners will prefer to pay by check.

One way to help avoid having that awkward conversion with business owners is to send as invoice every month to them. I learned this a little while back. They have about 100 things on their mind and paying for your services on time are probably close to the bottom of the list. By sending them an invoice every month you are hoping to bring it to the front of their mind. I use Freskbooks for my invoicing and you can set up automatic invoicing with them.

Also, they owe you the money so don't be afraid to ask them for it. You shouldn't be providing your service for free and they shouldn't get mad at you for asking. I've stopped providing services before until I received the next payment. The word "contract" seem to strike fear in ppl so mentioned the payment terms in the contract and that should at least get their attention. If you don't have a contract, you're on your own which is why I always suggest using a contract.

Good luck with this!

Sean

Another option is I have told clients to pay me in product or service or 50% money and 50% service/product. For example, I have had a restaurant (with good food actually), pay me in dinners. THAT I can feed my family with. It takes me about 20 minutes work a month and we have a couple eat-out nights we would not have had otherwise.

Get proper advice from lawyer as long as you have already made agreements about the named transaction. Forgive me for the short reply. In fact, what interested more that U are a truely addicted worrier.. God bless

Bassam

Ask for half upfront through a paypal. They always have place to complain if you don't deliver.

Just mention casually that you need the money to pay the annual Hells Angels membership fee. Works every time.

Try to work things out with them. Some businesses are going through a tough time right now, along with the rest of the world. You do not want to be a door mat, but on the other hand you do not want to burn a bridge of what may be a lifelong customer.

I do pre pay now for every new client. I had one that just kept avoiding paying me. I went by with invoice in hand one day and said "we need to talk". She knew exactly why I was there. I asked if the traffic I was sending was profitable and she begged me to turn it back on.

I said sure, soon as I get paid up and now you're on prepay.

Problem solved.

^And it's so much easier when you are providing a truly valuable service. That is why I like the rent-a-site/lead gen model so much. I know, for a fact, that I am getting customers to call my clients about their services just by checking my call log. And my clients know it every time they get a call that starts off with a message saying 'lead provided by Stranger Danger'.

I take their credit card info up front and charge everything to their card once a month. The 3% it costs for fees is well worth it to me because I can't stand the invoice/collection process.

If the card bounces (and that happens from time to time) my actions depends on how the owner responds when I call him. If he's a jerk, then all work stops until the bill is cleared up. But if he's reasonable, I'll work with him and often suggest some sort of barter exchange. I once got a whole year of free chiropractor services for my entire family through bartering.

When all I did was SEO I had a rule.... 50% upfront and 50% in the middle or the job never got finished... I understand what you are going through but, if you do not stand your ground like the people he pays every week who work for him, you will get burned! Ask him if he allows his customers to pay 60% and make him wait for the other 40%---- then you will either get paid or move on....

I forgot all about this selling point with credit card billing. Many clients like the opportunity to rack up "points" on their cards.

Just yesterday I had a long time client hemming and hawing about monthly billing. When I told him it could be automatically billed to his Amex monthly so he could earn points, he was more than happy to sign on the dotted line.

So many great ideas on this thread.

Thank you everyone.

They don't know what it takes to build up the entire thing from scratch and meet the deadlines.
Sad that it is a common practice these days.

In a situation where we have a late fee for a monthly/annual service, we kindly ask for it's payment 3 times in 3 different days - after last personal call, if the bill is not paid next day, we just unplug them.

If it's a website hosted with us, goes down.
If it's a website rental, we get their references out.
If it's some kind of management, everything stops.

Then comes the hard part:

To get back on track into our systems, clients have to pay the same amount they paid to get it started, and depending of the package it can be expensive. When people go berserk (and they DO!!)... We simply ask them: "When you miss a electrical bill deadline, what happens?"

That usually sets it.

I agree with Bredfan and also Portlandrocks.