Clients Not Paying You On Time? You’ll Want To Read This 💰
I’m not sharing my story to be petty — bringing people down is not my style — but because I know getting paid (period) is a struggle so many self-starters face. In fact, I was recently a speaker at FishBowl Live chat with Kate Talbot and Caroline Gutman, and this exact predicament came up! When you are your own boss, you want to get clients, do a kick-ass job on whatever assignment lands in your lap, and get paid for your hard work. But, when you’re on your own and going toe-to-toe with larger corporations, the whole process can feel intimidating.
That’s why I am so excited to introduce you to Keren de Zwart. As an attorney and owner of Not Your Father’s Lawyer, Keren is a wealth of legal knowledge. To help, she’s sharing her tips for getting paid — and getting paid on time.
Read The Fine Print
Landing a new client is always exciting! After putting in all the hard work, you’re starting to see your business take flight. Good for you, you deserve it! But, before you start celebrating, Keren encourages you to take a close look at your contract. (According to her, getting paid on time is one of the most common legal issues small businesses have.) So, what exactly should you be looking for? Keren shares her three biggest watch-outs:
1. Fees and Payment Clauses: Do they make very clear when and how the service provider gets paid? There should be an explanation of what needs to happen to initiate payment. And, be sure that there is a late fee built in. Very few people need to actually use the late fee clauses, but it’s a great way to light a fire under a slow-to-pay client. You should also include that the cost of collections are subject to reimbursement by the client if you have to pursue collections.
2. Potential Barriers to Payment: The most common example of this is in the case of any sort of creative work. You do the work [and] submit [it] to the client, but there is a disagreement about whether it’s complete because maybe they want more changes. The more clear the contract is, the easier it is to have certainty that your performance obligations under a contract have been satisfied.
3. Governing Law and Conflict Resolution Provisions: A lot of service providers are working with clients out of state, and if you are signing their contract, you are typically accepting the governing law of that client’s state of formation. It’s important to understand what rights (and limitations) you may have under those laws. And, get familiar with conflict resolutions provisions: Do they have an arbitration clause? Are you taking them to court if you need to collect? Sometimes the cost of litigating ends up being so expensive that it wouldn’t be worth pursuing, and you don’t want to put yourself in that position.
If your client doesn’t include these clauses — or something in your contract doesn’t sit well with you — don’t be afraid to speak up. After all, a positive, professional relationship is a two-way street.
“Both parties should want to be really clear about what’s being provided, how, and what constitutes completion,” Keren says. “If they push back hard on things like late fees and collections costs, that is the biggest red flag.”
As self-starters, our businesses are personal — and not getting paid for our hard work in a timely manner can feel like a slap in the face. While it’s easy to get emotional about a late invoice, Keren encourages you to take a deep breath.
“Stick to the fact that it’s a business transaction, even though it is quite literally your livelihood,” she explains. “They are under a contractual obligation, and demanding payment based on that obligation is part of the business transaction. Getting overly emotional [will hinder] your ability to communicate properly about it.”
Speaking of letting your emotions get the best of you, Keren says you should refrain from calling your client out on social media. While it may get lots of attention — and even help you let off steam — there’s always a risk your tweet or post could have claims of libel or slander.
Instead, Keren recommends communicating with your contact directly.
“Sometimes, it’s an honest mistake,” she says. “Sometimes, they are having an issue and offering to work out a payment plan makes it easier to tackle. And, sometimes, they’re just jerking you around and if they give you the runaround, you know it might be time to engage a professional or send them to collections.”
If you do speak with your client IRL, follow up with an email memorializing the conversation. That way, you can always refer back to your written summary at a later time.
Step By Step
You’ve done the work, submitted an invoice, followed up, and still haven’t gotten paid? Now, what? Fortunately, Keren shared an easy step-by-step guide to getting that green.
1. Submit the invoice with a clear due date based on the contract.
2. Send an email or call your point of contact on the due date or immediately after it’s late to remind them it hasn’t been paid and that late fees will be applicable as of X date.
3. If they still haven’t paid, reach out to see what’s going on and if you can utilize either the no-late-fee-if-paid-by-X-date method or a payment plan option.
4. If you can’t come up with a solution, send a formal demand letter pursuant to the notice requirements in the contract (usually sent by FedEx or certified/registered mail) with a clear date they need to pay by. One week is reasonable.
5. Still nothing? Now’s the time to consider engaging a lawyer, sending it to collections, or working with your accountant to potentially write it off as bad debt.
Since taking your client to court is expensive, time-consuming, and emotionally taxing, Keren says hiring a lawyer should be a last resort. (But, if you really need some reinforcements, go for it!) Additionally, Keren emphatically encourages self-starters not to shy away from pursuing collection of their invoices.
“It doesn’t matter if it’s $100 or $100,000, you provided a service for the client and they need to pay,” Keren says. “Sometimes freelancers will just write it off (and please, if you do write it off, consult your accountant and actually write it off as bad debt) because they don’t want to deal with the headache or stress of collection. And while I definitely support writing off things that are truly uncollectible or that cause too much stress, make a reasonable effort to collect before you give up.”
Know Your Rights
Unless you’re a bonafide legal eagle, navigating the messy world of late payments can be confusing and intimidating. Though you know you deserve to get paid, the whole situation can often feel like a financial version of David and Goliath. But, let’s make one thing clear: You have rights, so it’s worth doing your research.
“Different states have different rules, so where you are working and where the client is located can both potentially provide additional protections. In New York, for example, the Freelance Isn’t Free Act provides some specific provisions about timely payment and non-retaliation for freelancers.”
Even if your client files for bankruptcy, you still have rights.
“You can ensure you are listed as a creditor in the bankruptcy proceeding so that you’re potentially one of the creditors that can get paid at least some of what is owed,” she says. “This is really a cost-benefit analysis.”
Nobody is expecting you to become a modern-day Elle Woods, but take some time to learn more about your rights. And, if you have any questions, ask an accountant or lawyer.
A huge thank you to Keren for such an important and insightful conversation! Support Keren by following her on Instagram and checking out her website for tips, legal templates, and her custom, flat-fee legal services.
Hustler of the Week: Adrienne Kronovet
Congratulations on Ameliora! What inspired you to launch your own company?
Thank you so much! Ameliora began with a core belief that we can help women be successful. Every choice that we make is rooted in that goal. We initially launched in 2018 with an eight-piece suiting collection, and the feedback was incredible. In 2019, we launched the shirting collection with four silhouettes and have received outstanding reviews. In keeping with our intentional focus on details, we use the highest quality Italian fabric that has four-way stretch and is moisture-wicking. Our shirts are wrinkle free, breathable, fast drying, machine washable, and they do not pill or fade. I am so proud of these amazing shirts and wear them practically everyday.
What is your favorite part about being your own boss? Least favorite?
Being my own boss enables me to be hands-on in every aspect of the business. This allows me to interact with my customers on all levels. In May, for instance, I ran an Ameliora Book Club promotion. I had just read Bakari Sellers’ new book, “My Vanishing Country,” which I loved, and I was anxious to share it. So, I included a copy of his book with every Ameliora order. The feedback was overwhelmingly positive, and it was rewarding to be able to share his story with so many of our customers. I look forward to doing it again when I find another book that resonates and inspires me. The least favorite part of the job is seeing all of the devastation that Covid-19 has brought to my suppliers and customers.
What’s the biggest lesson you’ve learned since becoming your own boss?
As a young woman with a very specific point of view, I had to stand firm as I educated my suppliers on the Ameliora standard of excellence in all aspects of our work. These suppliers are now extremely proud of what they have produced and are eager to grow with Ameliora as we broaden our product line.