In an ideal world, you have a great relationship with each of your clients. First you connect, then the two of you have a great consultation and they are ready to sign an agreement for your highest-priced service package. You quickly execute the agreement, services are completed, all payments are made on time, and this new client becomes one of your best referral sources.
Unfortunately, it doesn’t always go according to this plan. Sometimes a client is late with a payment. How to handle a late-paying client is one of the most common questions I get. For many entrepreneurs, it’s unusual and takes them completely by surprise when it does happen.
In this episode, I talk about how to handle late client payments and discuss the issue from two perspectives. First, can you proactively try to avoid late payments? Second, if you do have a late payment, what steps should you follow to rectify the situation?
Please subscribe if you haven’t already. And if you like the show, I’d love it if you’d give it a review wherever you listen to podcasts!
In this episode:
[02:57] – Danielle discusses a few ways to protect yourself against late payments in your client agreements.
[03:55] – Asking for a deposit is fairly standard, but those working on an hourly basis often don’t think they can do this.
[06:20] – What if you’re not the one issuing the contract?
[07:12] – Even with a perfect agreement, you still may get late payments from time to time. Check these areas of your contract.
[08:21] – Touch base with your client after reviewing the terms of your agreement.
[09:03] – You’ll want to keep communication very friendly at this early stage.
[10:12] – What is a reasonable amount of time to wait for a reply?
[10:30] – If you haven’t heard back after a reasonable amount of time, then escalate your outreach in these ways.
[11:30] – Danielle discusses how to handle everyone’s least favorite step: making a phone call.
[12:04] – Send one final email if you still get no response. Danielle offers some sample language you can use.
[13:10] – What should you do if your final email also gets you nowhere?
[14:03] – Ensure that you’re compliant with collection laws. See Section 807 of the FDCPA.
[15:03] – When all else fails, you need to decide whether to use a collection agency or file a lawsuit.
[15:46] – Danielle gives one final caveat before deciding to file a lawsuit.
[16:01] – Executing a judgment obtained in a lawsuit can be cumbersome and not worth it unless you feel the sum of money justifies it.
[16:32] – Use these action steps to protect yourself against late payments and handle them when a client misses a payment.