What to Do When Clients Won't Pay Upfront?

Not every client is used to paying up front (even half). Many of these local businesses work on a net 30 or even net 60 days structure.

It is strange though why he seems to be so concerned about you ripping him off. Maybe he has an experience with someone else who offered to do similar work in the past. Or maybe he just really doesn't plan on paying you. Hard to say really.

If you really find the project interesting then you can always develop it but not actually give it to him. For example, if it is a website, just develop it on one of your domains. This potential client won't have any access to it. But you can certainly show him when it is complete and then if he flakes out and doesn't want to pay you can take that site, customize the logo and approach another local business.

Just depends on how busy you are and how interesting the project is. I have built databases and websites for people many times like this. So far they all have been so thrilled with the result they pay for the work and even pay more for additions they want.

BUT there is no guarantee. So it all comes down to how comfortable you are. If you have a Plan B.

Here is the thing. You said you need help financially, and it is very easy to give in, in a situation like this and I learned the hard way. The people that don't pay up front, string you along, and they are more demanding in what you do, because they know you will do it in order to get paid.

You are in a much better position getting paid upfront... because if they start to become needy, and want more, you charge them more without the risk of making them mad and not paying you.

Just run... you will find a much better client to deal with.

It's fine to do NET 30 or even NET 15 - but a retainer of 30% to 50% is also totally normal. So, if they want you to work hours that are worth $50 to $150 just for you to concentrate on them and not other clients - that's pretty bad.

I know salesmen who have pulled out a dollar and thrown on the table saying "Do you think I'm worth a dollar an hour?" and then explain that they are saying you are worth less than that. Every hour you spend trying to convince someone, is an hour you could be collecting actual money from someone else.

Also, the thing about "getting ripped off", either you did a lousy job presenting yourself, or they are incredibly broke/untrustworthy. A third option is that sometimes you can get into a situation where people have a hard time saying no - just because they simply can't afford something and have no idea how to tell you that. Maybe they can or maybe they can't but this kind of psychological debt can have you spinning around thinking they are a buyer while their brain is stuck in a totally different mode and starts making excuses left and right.

That last type is really bad because these twisted modes of thought can turn into them back-lashing at you out in the community or even at you personally later on. So yeah, either redo the sales and building a relationship or get away fast. I know this because I did plenty of "I need money now" jobs, and had to do damage control the whole time after. Sometimes that was my fault and sometimes it was theirs - well, it was certainly my fault for taking the job based on money over whether the two of us got along professionally.

You could always ask said client, "How do I know you're going to pay me when I'm finished?"

Upfront payment(half upfront & half at completion) is a totally reasonable business practice an if this client doesn't see that. He probably won't be reasonable about paying you when you finish. You have to establish this in the beginning and let the client know that "no upfront payment, no deal." Unfortunately if your still stringing him along he knows he has leverage, so its probably a done deal anyways.

I never start unless I get paid 100% upfront! Im glad I stared my business this way. Because I have about 4 clients that im going on 3-6 months and still waiting on things from them to finish there projects. If I didnt collect 100% upfront, then I would still be waiting to get paid even though I did 70%+ of the work.

Here is what I would do, tell them that they can pay with paypal and that they are covered not only by paypal but also their credit card if they use credit card, so you cant just take the cash and run.

But dont start until you get paid!

I think the question you should be asking is... how do you GET him to pay up front?

Chances are, if he's worried that you might scam him or under-deliver, he doesn't TRUST you. So why not provide more samples, more testimonials, answer more questions, add in more value where you can, etc...

Prove to him that he can trust you and your services. After you've done that, you'll have made the sale.

Use an escrow service.

There are sites like Freelancer.com and Guru.com that provide this service for a minimal fee.
Makes it safe for both parties.

This is what all bad clients ask. When they say it, just hang up the phone or walk away. Don't think twice... it will only get worse with these types, never better. The best thing to do is to find a higher class of client--this one is a bottom-feeder. Don't waste any time with this person, just move on.

A lady client was heard to say "It's worth more going up the stairs
than coming down!"

Hugh

It is really hard to give an opinion because we don't know the size of the project and, ergo, the actual risk as well as how busy you are. Is it web design or SEO that you will do yourself? Or will you outsource work and incur expenses upfront?

Without more information, nobody can give you good advice.

I will assume that you are not super busy because you said that you need the money and were in a rut.

So, if the amount of work is not monumental and you are not spending your own money, why not do progress payments. You both have the same concerns, i.e. getting ripped off. Set milestones and get paid upon delivery. Neither of you should have a problem with that, unless you are spending money and then it is a different story.

I worked with someone who desperately needed my help and also had trust issues. I didn't get paid upfront and she treated me terribly during the project and then added me to the bankruptcy she had already decided to file. Run, run in the other direction no matter how much you need the money. Chances are this person does not plan on paying you.

Bonnie

You have to stand your ground, and make them feel like if they don't pay you they will be loosing out big time. If they know your good, and they are going to loose you if they don't pay, than they will for sure.

If they wont even commit to a 50.00 domain registration.... I might walk away. They arent hot yet. You win some you lose some.... Im looking for that guy that says "Hey I need a website"! And he's excited about the idea!

This prospect isnt sold, or isnt interested... or is just ignorant and wants to remain that way. Here's the thing, they arent willing to invest in themselves.... thats the truth... I might move on. JMHO

Tell him you have other clients who are serious, and to call you when he is ready to take it more seriously.

If you appear desperate you will never get a call back.

In sales its called the "Take away", now the client thinks you might not have time for them, and you are percieved as more valuable. We all want what we might not be able to have.

Yup, the ole proverbial "take away". almost forgot about that one. Work on sales... and girls.

I you NEED the money; that's the best reason NOT to take THIS job.

If i were you, i'll quit. Leave your work if that's the case.

Based on experience I recommend not starting without a deposit. I think this is something that most freelancers (including myself) implement after not being paid for work.

Jack

When your broke you do desperate things, 9 times of 10, it's usually a bad decision.

Put all of your energy into finding a new client.

This client will may actually cost you money in the long run.

Good Luck

Fire him.....

Some will, Some wont, So what

My first advice would be to dump them...a.s.a.p. A lot of good info by others above supporting that....but....If you absolutely need this job....there are options.

It's unclear on what type of project you have....

If your designing a website....design it on a sub-domain....complete the site, get them to sign off on it & pay you in full, then transfer it to a new domain.
Or if your hosting the site also....do the same as above but do not set up his hosting until payment has been made...

If....for some reason they do not pay....take the site, strip his info & use some generic stuff, then use it as a rental site or offer it to his competition...

If it's something like a google places listing, set up the google email account to start the process but do not give them the password until payment is completed. That way....you are in control of the listing & it's keywords until the money is in hand.

Same thing for setting up social marketing accounts like facebook or twitter....or email marketing, autoresponders, etc.....you control the passwords....you call the shots until you receive payment...

What ever way you choose....get it in writing, in detail....


Good Luck,
~ken

I would say, get enough money up front to make it worth doing the work, even if they don't pay you anything in the future. If they can't do that, say thanks but no thanks.

If you really find interesting items, then you can continue to develop it, but in fact did not give him. For example, if it is a website, just developed in one of your domain. The potential customers will not have any access to it. But of course you can give him when it is complete, then the film if he did not want to give you money can take the website, custom logo and methods of another local business.

Have you thought of breaking down the job into smaller segments. Kind of like a contractor building a house. Getting paid at the end of each segment. If he doesn't pay you dont deliver and dont continue the job. That way you both dont risk losing too much. If this is a guy that insist on paying at the end and refuse to compromise then just walk away. People like that will most likely string you along, try to low ball you at the end of the job or find reasons not to pay. You are better off walking the other way.

What industry is this potential client in? How does payment work in their industry. Do they require payment from their customers at the time of service?

Walk. Always get a signed contract and at least a 50% deposit. I always ask for a 100% payment up front, but if I know them or understand the circumstances I will do a 50% deposit.

Explain to them that you are a professional, not a college kid or unemployed worker they found on Craigslist. As a professional you have certain rules and policies you've put in place to standardize your processes for clients.

Good luck!

I would like to ask here that if our client scam us by not paying after the completion of order, what all steps can we take. I have gone through such situation few times in the past, and don't exactly have much idea about it? So, if any of you can help me out....

Never start without 1/2 down. I've only had one client try and get out of paying the 2nd 1/2 @$1500 So I took sceeen shots of his results and made a very compelling story and I won the credit card dispute.

I love it when service providers create barriers between themselves and their prospective clients.

That makes it easy for a more "customer-centric" service provider to come in and offer more favorable terms -- usually with the explanation that if I offer more amenable payment terms, I'll have to raise the price to reflect the time to get paid on the deal.

So I even get more money on the back end for simply being patient and FOCUSING ON THE CUSTOMER INSTEAD OF THE MONEY.

I can tell you this much... this kind of reluctance by a prospect is amost 100% assuredly guarandamnteed to be directly related to the way you present yourself and your services. So quit creating barriers in the sales process and you won't get as much resistance when it's time to ask for payment.

We never take on any client unless they pay a fair portion up front. In fact most of our clients, celebrity and local businesses, pay at least 50% and oftentimes the full amount up front. We had one client who actually stiffed us for greater than $10K and learned our lesson.

A possible solution - set up milestones and payments to match. No work begins until at least 25% of the total project price is paid up front. At the beginning of the next milestone the next payment must be made in whatever increments to which you agree.

At that point, you don't deliver complete package unless the next payment is made in advance.

When you go get your car repaired at a mechanic shop, do they ask you for the money up front?

When you go to the doctor's office, do they ask you to pay an estimated bill up front, and then reimburse you the difference?

When you hire a plumber to come unclog the turd out of your toilet, do they ask you to write them a check before they whip out the wire snake?

I can go on and on and on.

See, this is the point.

I see a whole bunch of employee mentality in this discussion.

That is a mentality of scarcity - an employee mindset. You're so deathly afraid of not getting paid for your hours worked that you'll intentionally create obstacles between yourself and your client.

I experienced not getting paid for a project I did before so it's best for you to collect half of the price but make sure that you finish the project on time.

Let me put it this way? When you start a work in an office, do you get paid in advance?

I have been messed around a few times, paid, escrowed and then the job didn't get done. So, i don't pay up front.

It can be done either way. Examples:
1) You don't think you can fly on an airplane and only pay for your ticket upon safe arrival, do you?
2) You pay for your meal only after being served.

Personally though I would never start a job without at least 50% down because too many businesses don't respond quickly to provide necessary pictures/video or random other issues. Also, you only need 5 minutes on Craigslist to see how many people think they can get a "student" web designer or "in-house" developer for $7/hr to work on their site. That shows you how much some people value quality website work.

I'm sure it goes both ways and there are web designers who take forever to complete work, but I personally just don't want to deal with having to try and collect payment from an out-of-state client who needs a site but doesn't have any money. I would be willing to bet the instances of a client delaying or not coming up with the money would be around 90/10 versus a web designer not getting the work done on time. Most web designers want referrals and happy clients, while clients just want to be served.

I have to mention there are some theories of economics behind this question, and thereafter some accounting concepts.

First, net10-15-30-45 and all those are only agreements based on standards of how a business chooses to operate. It is always up to you to declare what you expect and it is always up to the two parties to agree or not.

I have worked with large companies who did not expect to pay until 60 days after delivery (also a separate product here). These tended to be very large corporations, which also mean they were very familiar with retainers and money up front at least 30% and of course 50% is totally normal.

The smaller the business, you may run into the same thing - but it is pretty well known that smaller companies and jobs or contracts that only take two to four weeks to complete require some kind of payment up front, and in full on delivery. Either way, a retainer is completely and totally accurate.

Also, it is kind of an unspoken rule that the 50% you get up front should cover all your cost for taking the time to work with them. If you extend yourself on speculation you are making a bet to fail; and any rational business owner knows this without question.

As for an economic part, this has helped me. There is a book called "economics in one lesson" that is actually entertaining and should explain some foundational principles of how and why you price things for the market in general. For instance, there is no real thing such as "price"; meaning it is based on history and the past and is never real until you say what it is based on what someone in the PAST paid. Cost, however can be far more real but just as illusive. However, price is what creates cash flow or the flow of revenue. Simply put, you lower your price to increase revenue (the flow of customers). You raise it to slow down revenue. So the price is whatever you say it is.

So if it costs you $150 an hour to even turn your computer on, then if you do not take any money up front, YOU are spending that money - until you are compensated. In other words you are already taking on a debt. Consider, how many customers (or revenue) could you be garnering in the time it takes to satisfy the customer who is not going to pay (yet or whatever)?

Final concept here. If someone is not going to pay up front (and is pi@@ing me off), my price just skyrocketed; and its not snide or BS, its very real. So that is I would have charged them 1500 for example - $750 up front. Wanting me to jump through a hoop - they just got a 3.33% increase and one third up front.

So its alright to grab some clients real quick if you that is what it will take to get some testimonials or some influence; but realize that the cost is very real and the price is there whether you identified it or not. Also try to think about it like this - you can wake up and go think about daisies all day - OR - you can work for someone else so they can think about daisies all day. How much is it worth to you to STOP your life for someone else's? From the time I wake up, I know my time is worth at least 150 an hour, and that is being generous! Also, every hour I don't work, I know that I don't have that money coming in, but I do still have my interests going on which are worth even more than that.

Also, I COMPLETELY agree with milestones and deliverable's. As well with SCOPE FREEZE, as in if we determined a scope of a project, and they come in halfway through with a major change saying "just a little thing I thought of...." you have to do the same thing at that time as well. If you drop your baseline on a project in order to make changes at any whim of the client, you can lose out really badly in the quality of the project. I mention that because its very similar to the same question in the beginning "Can we see what you can do first before we invest in you?" turns into
"I think you could be doing a better job if you just dropped this one other item into the project."

So really, what you are seeing right from the start is how you are going to handle requests from the client and more often than not, this is coming from a "control freak" who is more into micro-managing every detail rather than actually getting goals accomplished. So, this is actually a classic trick that happens in business at all levels. You have to play these types like a card game and put your foot down.

Perhaps try to negotiate to meet in the centre? Look, he may say that he's afraid you might rip him off...could the reverse be possible as well? He can always play punk and do the same to you. Best thing to do, is to come up with a contract agreement that is legally binding..if he doesn't even want to, don't go with him - that'd be downright sleazy.

And if you REALLY NEED THE MONEY...DONT DO IT. You might end up in more trouble than it's worth man.