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Ask HN: What would you do? Unpaid invoice

6 points by jamesjguthrie ↗ HN
Hey guys

My first software development client invoice has went unpaid for a month now. The client does not respond to e-mails or phone calls. I sent a reminder yesterday that it's due.

I've had subsequent work from other clients since and those invoices were promptly paid.

How long should I keep trying to contact the client before taking him to court?

19 comments

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debacle
1. If you did not have a lawyer write up your service contract, contact one now. It will not cost you much to get a boilerplate contract specific to your state.

2. Wait at least three months but no longer than six months. I've seen people wait less than 60 days but in my mind that can send the wrong message.

UnoriginalGuy
What is the due date on the invoice?

Typically you would send an initial invoice with a +30 day (ish) due date. The client would pay as close to the 30 days as they could because it is better for their cash-flow.

If they failed to pay after 30 days you would send them an "invoice overdue" letter. When you're comfortable that had arrived you could then call/e-mail them essentially asking them about payment on the initial invoice.

If this "invoice overdue" notice isn't paid within short order (20~30 days) then you should send them a "final notice" and this should specifically indicate that the next step is court/collections.

Everything should have the date of issue, the date it is due (e.g. +30 days, immediately, etc), and you should not do too much "extra work" beyond sending out letters and the occasional phone call (as this implicitely costs you money).

If they still haven't paid after the final notice then you can either hire a collections agency (who will take a % cut) or attempt to sue them (and hope they don't declare bankruptcy).

jamesjguthrie
I'll take your advice by following up with an invoice overdue e-mail next week, then a final reminder 4 weeks later.

I'm in Scotland. If the invoice remains unpaid after that period I will take the client to the Small Claims Court. It's very typical that if a case is submitted to that court, the accused ends up paying the invoice before the hearing date.

klearvue
Since you are in Scotland and the invoice is overdue, you can legally add £40/£70/£100 penalty to your invoice (which one depends on the invoice amount) + charge 8.5% annual interest. These do not have to have been specified in your contract with the client as they come under provisions of the Late Payment of Commercial Debts Act.
shyn3
Have you provided them with the project? Next time put a backdoor in your code and remove it after payment. Most people don't check.
Spoom
A backdoor would very likely get the coder sued, and legitimately so.
jamesjguthrie
Yeah, I'm sure code like that would constitute unauthorized systems access.
shyn3
You guys do have a point.

I usually pay freelancers to do my stuff and I feel bad if someone is going to run away after getting their work.

I guess it depends on the scope of work. I think in Canada we have a law where if you do something criminal then you can't charge the person for stealing.

i.e. If you are selling drugs and I steal your drugs then you can't take me to court. In this situation if I were to steal your code/work then stealing it back or making it stop working would suffice.

If it's a .php script maybe make it refer to your web-server for certain parts of the script so that the full functionality isn't there if the user runs away with your code. Something like passing back a token for verification as with serial numbers. A phone-home mechanism of some sort.

shyn3
A really smart freelancer added a clause similar to this to a contract.

Payment: Net/30 - 2%, 7. Payment due in 30 days, 2% discount if paid within 7 days.

Also they added: If the fees aren't paid within the terms above, there will be a 20% interest per 5-business days.

I would think that would work encourage those willing to pay to pay faster. The ones who aren't going to pay I don't know.

Mitchella
Contact the client multiple times via different routes. Email, Phone, In person. I would give it 60 days at most. The amount of time that you let it slide should really be determined by your contracts, your business, and cashflow.
ActVen
I would just advise to make sure something internal isn't holding up payment at the customer. If this is a larger company, any number of things could be causing it. If it is a small company or an individual, then disorganization could be a cause...or a lack of funds. My companies have faced this issue in the past with companies from the Fortune 50 to small companies. Very few times did something actually go unpaid for longer than 90 days. Just be friendly and persistent.
johnrgrace
Not responding at all is VERY bad, it is a very strong sign they aren't paying you soon per my experence. First, read your contract slowly from end to end. Second, you need to hunt them down and make sure they are alive; note this doesn't mean you talk with them. Also get ready to talk with a lawyer.
brudgers
[Disclaimer: I'm not in software development.]

I require a retainer to be applied against final invoice for all but the best clients (and I still worry about those).

I don't turn over work until there's a check if I'm upside down, and I try not to be upside down.

Finally, I don't start a project until I have a signed agreement and a retainer.

In the past, I have not hesitated to use small claims court when I knew a client was intending not to pay.

tptacek
A month is not a long time. Even if you had Net-15 terms, clients can be expected to take longer than a month to pay them.

Large companies, in particular, routinely manage to get invoices held up in accounting. Invoices can get silently dropped for, for instance, not using the right P.O. number, or having the P.O. miskeyed into their backend.

statictype
How big is your client? I think, in general, the larger the client, the more time they take in paying up. If your client is large (hint: any contact you have in their finance department is at least two levels removed from CFO) you should probably have to wait for more time before worrying (and also, in the future, raise your prices to factor this in).
devb0x
I'd consider overdue letters with a gentle reminder of the terms of payment.
jamesjguthrie
Thanks for all the reply guys. The client is a very small media company in England - I believe at most 2 people work in this company.

My contact is still not answering messages or returning calls.

The next step after an overdue letter will be the Small Claims Court with penalties added.

jamesjguthrie
Just a little update:

I finally heard from the client, he gave me a story about how his phone broke, his mother-in-law has been sick, how people who owe him money haven't paid it and how none of the potential clients for the software have come back to him yet.

He offered to pay part of the invoice now and part later. I said fine but I will apply interest to the invoice and he only has a further 30 days until the issue goes further.

I wait with baited breath for the rest of the payment.