This post should not be considered legal advice. It is for educational purposes only.
Dealing with a client who refuses to pay or goes silent when you send an invoice can be extremely frustrating and stressful. You’ve completed the work, delivered services as promised, and sent the invoice, yet the payment never arrives. Whether it’s a simple oversight, financial trouble on the client’s end, or outright avoidance, unpaid invoices can disrupt your business and create unnecessary stress. When this happens, it’s crucial to take action quickly and strategically to increase the chances of recovering your hard earned money.
Fortunately, there are practical steps you can take to handle non-payment professionally while protecting your business. From sending firm reminders to negotiating payment plans and, if necessary, escalating the matter legally, knowing your options can make a significant difference in securing the funds owed to you and lessen the stress of outstanding payments.
In this post, I’ll walk through the best actions to take when a client doesn’t pay to help you navigate this difficult situation with confidence and efficiency.
What to Do When a Client Doesn’t Pay
Prior to jumping into action items, these tips assume you have a contract in place with your client. It’s imperative that you have a signed (and dated) contract in place with each and every client for each and every project. Contracts establish clear expectations and protects both you and your client in case of disputes. A well-drafted contract outlines key details of the business relationship, including but not limited to, project scope, payment terms, and deadlines, ensuring that both you and the client are on the same page from the start.
Contracts also serve as a legal safeguard and provide leverage if a client refuses to make payment. Without a well drafted contract, you risk miscommunication, scope creep, and non-payment, which can all negatively impact your business. By making contracts part of your standard workflow, you will ensure a more professional, secure, and transparent working relationship with clients while reducing the risk of complications down the line.
How To Collect Payment From Client
What to do when a client doesn’t pay … Once you’ve sent an invoice and the payment due dates have come and gone, you’ll want to take the following steps to attempt to recoup payment from the client.
1. Follow Up via Email
Monitoring your accounts receivable closely and following up on overdue invoices promptly can help prevent long delays in collecting outstanding payments. Sometimes, non-payment is simply due to forgetfulness, administrative errors, or disorganization on the client’s part. You’ll want to craft a series of reminder emails to remind the client about the outstanding invoice. In the follow up emails, you’ll want to include relevant details like the outstanding amount, if you’ll be charging late fees, due dates, and accepted payment methods. I typically recommend sending a series of three follow up emails after the initial invoice has been sent without successfully recouping payment.
Often times, the first reminder email can resolve the issue quickly if the outstanding payment is the result of forgetfulness, error, or disorganization.
As you draft the second and third follow up emails, the reminders should become firm in tone while maintaining professionalism.
In the final email follow up, I recommend stating that while you hope to avoid taking legal action, if the outstanding payment is not made by a certain date, you will be reaching out to an attorney. A payment deadline of 30-days from the send date of the final email would be the most generous runway I would recommend giving a client to make an outstanding payment.
Depending on the client relationship, you can also offer a payment plan if circumstances warrant. Some clients may be avoiding full payment of an outstanding invoice due to financial difficulties. In some cases, proposing a payment plan may increase the likelihood of receiving payment in full.
2. Send a Demand Letter.
If email (or phone call) reminders and follow ups don’t work, the next step would be to retain an attorney to draft and send a formal demand letter on your behalf. Prior to hiring an attorney, you’ll want to take into consideration the amount of the outstanding invoice. Is the amount worth hiring an attorney to recoup?
If the amount is worth pursuing, you can hire an attorney to draft and send a demand letter (also referred to as a debt collection letter). The letter should outline the amount owed, include all dates of previous invoice send dates and reminder/follow up send dates, include final due dates, and outline the consequences of non-payment.
The consequences of non-payment typically include hiring a collection agency or pursuing legal action through small claims court. Oftentimes, the threat of legal action is enough to get the client to make arrangements for payment.
3. Hire a Debt Collection Agency or File a Lawsuit.
If a client continues to ignore payment requests despite multiple reminders and a formal demand letter, hiring a debt collection agency, or pursuing legal action through small claims court may be necessary to recover outstanding payments.
Collection agencies specialize in recovering unpaid debts and can take the burden off your shoulders by handling persistent follow-ups. However, keep in mind that these agencies typically charge a percentage of the collected amount as their fee, so it’s important to weigh the cost against the amount that is outstanding.
If the debt is significant, and the client remains unresponsive, filing a lawsuit in small claims court may be the best option to pursue. This process allows small business owners and freelancers to sue for unpaid invoices without the need for an attorney (although you can also hire an attorney to assist), though legal fees and/or court costs should also be considered.
Before pursuing either action, you should ensure you have all necessary documentation, such as signed contracts, invoices, payment records, and communication records, to support your claim(s). While legal action can be time-consuming, it sends a strong message that you take non-payment seriously and are willing to defend your business against clients who refuse to perform payment obligations under the signed contract.
In Conclusion
Dealing with a client who refuses to pay can be frustrating, but taking a structered and professional approach to collecting payments can increase your chances of recovering what you’re owed. The key is to remain persistent while maintaining professionalism, as burning bridges with clients could harm your business reputation and future business opportunities.
To hopefully prevent these issues in the future, always establish clear payment terms up front by using detailed contracts and setting expectations regarding late fees and consequences for non-payment. while some payment disputes are unavoidable, having strong business practices, such as well thought out contracts in place, will reduce your risk and ensure a smoother business finance workflow.
By setting yourself up with strong client contracts from the beginning of all client relationships, you can better protect your business, maintain financial stability, and focus on what you do best – providing your services to clients and growing your business without the stress of unpaid invoices.
If you have questions about your client contracts or need assistance collecting outstanding payments, send me an email at [email protected]. I’d be happy to help.
