Varying incomes and a lack of financial security can strain some contractors’ cash flow. Things may be even worse if you are stuck with a client who delays payment or refuses to pay at all.
It seems unthinkable that if you have completed a project or provided a service, your client will not hold up their end of the bargain. However, getting paid can be challenging for some contractors and self-employed individuals.
Chasing payment can be tricky, as you don’t want to damage the relationship or jeopardise any potential future work.
That said, a client who doesn’t honour your agreement is probably a client you don’t want to do repeat business with anyway.
Chances are, your client has simply forgotten, and a small nudge will see them chasing up the accounts department.
But for times when this is not the case, these ten tips cover how to handle a client who refuses to pay and how to avoid this situation in the first place.
Thanks to the team at Nixon Williams for providing these tips. They’re aimed mainly at limited company contractors, and some advice is more applicable if you’re working directly rather than via an agency.
1. Research new clients
If you haven’t worked with a client before, you may want to do some research before signing any contracts.
Most contractors and freelancers won’t have the budget to complete a full credit or background check, and it probably won’t be financially viable to do this regularly anyway.
However, looking online to see if they have been referenced in any negative posts or articles could be all that is necessary. If you come across any press releases or news stories stating that the company is days away from bankruptcy, you may decide to leave this one and move on to your next role.
You can search for the company on Companies House, or even pay for a professional credit check.
2. Ask for payment up front
Working for a new client for the first time can be unnerving, but remember that it is standard practice for contractors and freelancers to ask for part payment or even the entire fee upfront when dealing with new clients.
If the client refuses or gives a feeble excuse for not doing this, alarm bells should ring, and you may want to consider walking away from the project.
If a payment date has not been stated, then your client should pay you within 30 days of receiving the invoice, but it could be worth spelling it out to them and also stating the actual payment deadline date.
When expressing how you expect to be paid, try and make the process as straightforward as possible for your clients.
This means including your bank details on invoices so your clients can easily complete a BACS or Faster Payments transfer and listing any other payment methods that you are willing to accept.
4. Send a project summary
A subtle but potentially effective way to remind a client of the quality of your work and that you deserve to be paid is to send a summary of the project you have completed when you send your invoice.
Include the work you have completed, deadlines you have met, and any ways that you have exceeded your client’s expectations.
5. Follow up email
Once the payment deadline (usually 30 days) has arrived, send a reminder email to your main point of contact at the company. Remember, the chances are they have just forgotten or misplaced your invoice, so keep the email friendly and professional. You can always change your tone further on if the client continues to delay payment.
6. Follow up telephone call
If you don’t receive a response from your email after a few days, it is time to pick up the phone. The company may be able to dismiss your email, but phone calls are far harder to ignore.
You may want to play this one differently by not contacting your regular correspondent, as you do not want to ruin the potential for more work in the future. Ask for the finance department instead, particularly the person responsible for paying invoices.
If you are given an excuse that means payment is delayed, such as in the case of financial troubles, be compassionate and offer alternative payment methods or the chance to pay in installments. Being flexible will ensure you remain on friendly terms with the client, and even if your money is coming to you in small amounts, it is better than not getting anything at all.
7. Stop working
Depending on your situation and relationship with the client, you could cease working until you are paid what you are owed. If you decide on this option, it is a good idea to be honest and warn your client of your plans, especially if you have any pre-arranged work.
The last thing you want is your client chasing you for work you haven’t done, which may also make them less inclined to pay up.
8. Charge interest
Government legislation has been put in place to enable contractors, freelancers and small businesses to charge interest on late payments; this is known as statutory interest.
The amount you can charge in the UK is currently 8% plus the Bank of England base rate for business-to-business transactions, which is currently 5% (figures correct September 2024).
If you are going to charge late-paying clients interest, be sure to warn them of your intentions beforehand. This can usually be done when negotiating your contract or as part of the payment terms stated on your invoice.
9. Seek legal assistance
This doesn’t mean to go in all guns blazing; at this stage, to try and maintain your relationship, it can be as simple enough as asking a solicitor to send a letter to the client on your behalf.
The unstated threat of further legal action could be enough to persuade your client to pay their debt. You may also seek the services of a debt recovery provider.
10. Go to a small claims court as a last resort
This should be your last resort. It is important to make sure that the cost will not exceed the amount that you are owed. You should also be aware that if you decide to pursue this option, your relationship with this client will most likely be over.
