How high-value is the client, how high-maintenance are they relative to other clients (apart from late payment), how attached to your service are they, and how late do they pay (days, weeks, months)?
Before you do anything, consider whether the client represents a sufficiently large fraction of your business that you can't afford to touch them. If they do, then focus on getting more clients first.
You might also have a conversation with them about the reasons for the payment delay. Perhaps they have some "enterprise" weirdness to deal with that you could simplify if you ask.
The suggestions below assume you've had that conversation, and they don't have any reason for the late payment that you could help them solve more easily.
If they're high-value and otherwise low-maintenance, they're not paying ridiculously late, and especially if they don't seem extremely attached to your service, then consider whether you care enough to change anything.
If they're low-value and high-maintenance, such that you wouldn't mind getting rid of them anyway, use this as a justified reason to get rid of them if they don't start paying on time.
If they're high-value but high-maintenance and paying sufficiently late that it causes you non-trivial problems, you might have a conversation with them first, and then consider instituting a small fee for late payment, based on the number of days late. Provide appropriate notice in one month's invoice, and then start invoicing for the fee. If you want to take an even lighter touch, forgive the fee for one further month, listing it on the invoice along with a "first-time late fee waiver". They'll do one of 3-4 things: start paying the fee, start paying on time, complain at you (in which case you can talk to them about it at that time), or abandon the service. Don't go down this road unless you can live with whichever of those they do.
If they're low-value but low-maintenance, the same suggestion above about instituting a late fee applies, but it'll hurt less if they leave.
I ran a web design company for 5 years and having late payment terms in the contract was essential.
When payment was late I'd typically write something like:
"Thanks again for a fun project, the team really enjoyed working on it. I did notice that Invoice XXX was due on XX/XX. If you could let me know when it's in the mail, I'd greatly appreciate it. Thanks again and looking forward to collaborating again soon."
I felt like it was important to bookend the request for money with two positive reinforcement statements to keep the tone predominantly friendly.
If still no payment, then I'd send:
"I want to quickly follow up on Invoice XXX. There's a late fee of $XX scheduled to go out on XX/XX. If you could kindly let me know that payment is in the mail before this Friday, I'll make sure the late fee gets cancelled."
I felt like this respected their time and drove home the point that this issue wasn't going to be ignored on my end. I think it also sounded like I was on their side and wanting to help them which is key because once friendly discourse breaks down, it becomes infinitely more difficult.
Another clause that was helpful was that ownership transferred when payment was made. So, in essence they were illegally using our creative work if it went live and they didn't pay. If the above didn't work, then a reminder of this usually did the trick.
In the end, if it's more pain than it's worth, just let them go. If they're a good client, then collection is just an unfortunate necessity in service work unless you can setup a retainer which is nice, but you'll still have clients that want work done before their next retainer payment comes in.
If you have more questions, I'm happy to chat. Email and website in my profile.
Do you have a clause in your contract for overdue payments? As a contractor, I have seen something like net 30 with 1-2% interest charged beyond that. I'm not sure if there's a norm for this.
Don't punish them for paying late, reward them for paying on time.
$200 hr 30 day net, 25% discount ($150) if paid within 15 business days. [1]
Some companies have a policy of borrowing money they owe, well everyone, for 30 days because it financially benefits them. Change the calculus for them.
[1] And yes I've done almost exactly this. (It was 10 days, not 15.) I was actually kinda happy when they were late.
Require a deposit up front. Even for a nominal amount. Or, break up the project into milestones and require payment before working on the next milestone.
If in the UK/Europe, you could have them set up a direct debit mandate and then just take payment 3 days after you send the invoice. The direct debit guarantee means they could reverse this, but that requires them to take action to stiff you.
Keep doing everything exactly as you have been. (i.e. shut up and accept the late payment, each and every month, month in, month out, year after year.)
All the other suggestions in this thread are totally wrong.
if you want, I'll renegotiate with you. Their new payment due date is 30 days later. Bam. They're now paying early, instead of paying late. All without talking to them. All on your end. Its just psychology.
12 comments
[ 0.25 ms ] story [ 39.7 ms ] threador move them to a pre-payment method, perhaps?
Before you do anything, consider whether the client represents a sufficiently large fraction of your business that you can't afford to touch them. If they do, then focus on getting more clients first.
You might also have a conversation with them about the reasons for the payment delay. Perhaps they have some "enterprise" weirdness to deal with that you could simplify if you ask.
The suggestions below assume you've had that conversation, and they don't have any reason for the late payment that you could help them solve more easily.
If they're high-value and otherwise low-maintenance, they're not paying ridiculously late, and especially if they don't seem extremely attached to your service, then consider whether you care enough to change anything.
If they're low-value and high-maintenance, such that you wouldn't mind getting rid of them anyway, use this as a justified reason to get rid of them if they don't start paying on time.
If they're high-value but high-maintenance and paying sufficiently late that it causes you non-trivial problems, you might have a conversation with them first, and then consider instituting a small fee for late payment, based on the number of days late. Provide appropriate notice in one month's invoice, and then start invoicing for the fee. If you want to take an even lighter touch, forgive the fee for one further month, listing it on the invoice along with a "first-time late fee waiver". They'll do one of 3-4 things: start paying the fee, start paying on time, complain at you (in which case you can talk to them about it at that time), or abandon the service. Don't go down this road unless you can live with whichever of those they do.
If they're low-value but low-maintenance, the same suggestion above about instituting a late fee applies, but it'll hurt less if they leave.
https://creativemornings.com/talks/mike-monteiro--2/1
When payment was late I'd typically write something like:
"Thanks again for a fun project, the team really enjoyed working on it. I did notice that Invoice XXX was due on XX/XX. If you could let me know when it's in the mail, I'd greatly appreciate it. Thanks again and looking forward to collaborating again soon."
I felt like it was important to bookend the request for money with two positive reinforcement statements to keep the tone predominantly friendly.
If still no payment, then I'd send:
"I want to quickly follow up on Invoice XXX. There's a late fee of $XX scheduled to go out on XX/XX. If you could kindly let me know that payment is in the mail before this Friday, I'll make sure the late fee gets cancelled."
I felt like this respected their time and drove home the point that this issue wasn't going to be ignored on my end. I think it also sounded like I was on their side and wanting to help them which is key because once friendly discourse breaks down, it becomes infinitely more difficult.
Another clause that was helpful was that ownership transferred when payment was made. So, in essence they were illegally using our creative work if it went live and they didn't pay. If the above didn't work, then a reminder of this usually did the trick.
In the end, if it's more pain than it's worth, just let them go. If they're a good client, then collection is just an unfortunate necessity in service work unless you can setup a retainer which is nice, but you'll still have clients that want work done before their next retainer payment comes in.
If you have more questions, I'm happy to chat. Email and website in my profile.
$200 hr 30 day net, 25% discount ($150) if paid within 15 business days. [1]
Some companies have a policy of borrowing money they owe, well everyone, for 30 days because it financially benefits them. Change the calculus for them.
[1] And yes I've done almost exactly this. (It was 10 days, not 15.) I was actually kinda happy when they were late.
All the other suggestions in this thread are totally wrong.
if you want, I'll renegotiate with you. Their new payment due date is 30 days later. Bam. They're now paying early, instead of paying late. All without talking to them. All on your end. Its just psychology.
It's all in how you look at it.