Ask HN: What to do if client ghosts and won't pay? I operate as a US based, LLC and have a UK based client. We have a pretty robust master services agreement in place with clear term and termination terms. The client stopped talking to me or replying in anyway with a large bill (1 FTW, ~2 months). What should I do? |
Technical competence is only 1 of the 3 things you need to be good at to make it in this business; the other two are (a) getting paid (b) finding new work
By definition an entity that does not pay, is a leech not a client.
My approach is to break down projects into small units of work. Bill upon delivery of each unit and stop further work until it is paid for. Of course, there are some leeches out there who will bluster to get more work done without paying for what has already been delivered. I simply fire any client who becomes too abusive. They are simply not worth the hassle.
You only need to find work and get paid.
Technical competence is just a bonus that may improve longevity, sometimes.
The most useful thing you can do is a "mission debrief".
+ Identify what were the warning signs of non-payment. Sometimes they will be there from the start and the client never intended to pay. In longer relationships, non-payment is part of changing behaviors and often due to other financial stresses (this is how it tends to play out in economic downturns).
+ Identify the reasons you accepted this particular job/client. It is one thing if this job/client looked like other previous jobs/clients. It is another if the job/client was accepted due to ambition (expanding internationally) or desperation (just need the work) or greed (terms more lucrative than normal).
+ Identify why the client chose you. Maybe you have a rare special expertise (though by definition, this is rarely applicable). But if your services are somewhat fungible (much more common), it is worth examining why you and not another similar service...or to put it another way, a web developer might think about "what happened to this potential client's last developer?" Was the lead outbound or inbound? Was it a warm introduction or a cold call?
In the end, the best likely outcome is a better intuition about potential clients and which one's should be avoided and a greater willingness to stop work quickly over payment and eventually a better process for assessing the financial wherewithal of people and their projects. It is unlikely you will be paid.
For what it is worth, contracts/terms are somewhat useful for defining project scope and describing the processes of work delivery and payment. Unless you are big enough to have attorneys on retainer, they are pretty useless as something to point at when things go off a reasonably happy path. Client and project selection are much more valuable.
Good luck.
A major symptom is that many of my worst clients are both impressive and repulsive. We have decades of experience with people (yes, even us needs) and whatever your instincts are about someone, it's probably right.
https://www.gov.uk/make-court-claim-for-money
You can file your claim online if it's under GBP$100k (~USD$130k). There is a faster/simpler claims process if the amount is under GBP$10k (~USD$13k).
Usually this is enough, however if it gets to the point where they have a court hearing and your presence is required (unlikely), then give someone right of attorney to represent you (eg. friend, lawyer, etc.).
"You might have to go to a court hearing if the other person or business (the ‘defendant’) denies owing the money and you disagree with their response."
Funnily enough the client became very responsive after they found out we had legal representation in the UK. Still have not seen any money in the door yet.
I sent them the late invoice every two weeks for four or five months (while I went on with other work). I always was courteous and asked if hey had any questions or concerns about the invoice. I also reminded them it was past due.
I did send them a Christmas gift (box of chocolates) and I think that is what finally pushed them over the edge.
They paid me.
It was a hassle and I wish I'd gotten a deposit upfront.
https://creativemornings.com/talks/mike-monteiro--2/1
If you want a specific answer, skip to 11m20s
If he doesn't come back it's not worth it to chase.
On your next jobs double your rate and ask for half up front. If client is nice offer small discount at the end to keep your clients happy. People you want to work for rarely care about the price but are as happy about discounts as anyone.
Unscrupulous people could get an awful lot "for free" if every company gave them one chance like that. It'a a service to the community to take them to the cleaners.
I believe that there's so few freeloaders and so many wanting to punish them that I'm better off suppressing punisher impulse in myself and find my pleasures elsewhere, cheaper.
You could say that I'm freeloading on the backs of freeloader punishers. But same could be said about anyone not working for the police, justice or IRS.
DIY legal action is doubly expensive. 1) you probably don't know the correct procedures, and 2) while you are lawyering, you are not earning an income from your profession.
1. Send a final notice letter, indicating that non-payment will result in the debt being referred to a collections agency.
2. Sell the debt to the highest bidder, ie a debt collector.
In one instance, I got paid after the letter. And in the other, I made back ~60% of my money + got a VERY entertaining call from an ex-client who'd just had a debt collector rock up in his lobby and refuse to leave.
I'm a big believer in "F#ck you, pay me" and when I do freelance work I make sure that my clients share that belief. Generally I also lay out a schedule of payments based on either milestones (ie 'X is implemented') or on a regular timed schedule (normally once a fortnight) - if the client misses a payment, work stops until they pay.
Never let a client threaten you with "bad word of mouth" or any other nonsense like that - at the very worst they'll deter one of their mates from doing business with you, and if they're alike at all there's a good chance they would try and not pay you as well. It's not worth establishing a reputation that clients can just not pay you and get away with it.
If you have any thing running in which they rely on you, suspend it in order to get their attention until payment is due. If a large bill is due, and they are having trouble paying it, than offer them to pay X by this date, and another X by this date. If no payment is made to you, than inform them that if they don't pay X by a certain date, they will be terminated and any future work for them will not be considered at all.
If you wish, you can throw in some legal jargon in there that you will be getting a lawyer or proceeding to small claims court, if you wish to take it that far.
It's too easy to ignore your e-mails and then there is such friction with replying after they have ignored you several times and think they are getting away with it.
Being based in the UK, I will follow up on your behalf if you want. I like getting this kind of thing sorted.
If it hurts but you'd rather not have the time sink, drama, stress and effort of pursuing it, then drop it with lesson learned.
The second option, appoint a lawyer in England and if they say you have a case then let them pursue it for you.
I would warn you not to get too involved. Legal cases are extremely stressful and occupy a huge amount of head space. Try to just hand it to the lawyers and give minimal thought to it.
I've seen many people become totally obsessed with legal cases and who is right and who is wrong, and they can't think of anything else and alienate themselves from everyone around them because they can think of nothing except the legal fight. Don't do this.
Depending on who the company is, some people choose to make their quest to be paid public in an effort to shame the company into paying. It might work I suppose.
It's also worth just calling and calling and calling until you get to speak to the right people.
I've had clients who intended to pay but were under cashflow pressure and thus ignored me. My relentless calling twice a day eventually got them on the phone, at which point I asked to understand what was going on, and having secured a commitment to pay, I then relentlessly called daily from the day they said they would pay (they usually don't pay on that day). Start leaving detailed messages with every single employee of the company that you can get on the phone saying why you are calling. "Could you please get him to call me back ASAP regarding the unpaid bill of $X. I've left 30 messages and he has not called me back." I also explain to them that this is a small company and this money makes a real and tangible difference to my ability to feed myself and my family and could they please do their cashflow management with bigger companies who can absorb the pain.
And, if you want to play hard as a final resort, let them know you'll be very vocal with their client base and employees with personal phone calls until you get your money. Become such a thorn in their side that they pay to stop being annoyed by you.
Public posts on LinkedIn asking them to call you about the unpaid bill are also an extremely crass but possibly effective mechanism for getting them to sort it out.
Finally, don't be whiny or strident cause you'll sound like a crackpot. Always keep the story straight and bring it back to the certainty that you are owed the money. "We've got clear signed terms here, the work was done, the costs incurred, payment now 130 days past due, there's no reason this should not be paid". Never get angry when communicating with them about it because this will give an excuse to disengage and will lose you the high moral ground... keep monotonously consistently factual and emotionless with your message.
Another option you have is to sell the debt to an english debt collector. I know of one debt collector who employed a well-known former world champion boxer on salary and I have no doubt he made some personal debt collection visits - there's a fine line there but if these people have effectively stolen your money then why not spend 50% of it to make it their problem with an aggressive debt collector.
Is it a small company or large company? Maybe they have gone out of business? What do you think is the reason they have not paid?
edit: actually, thinking about it again, I'm pretty sure they implied that completion of the new work might cause them to reconsider their stance on paying for the initial work.
I haven't seen results yet.