Sometimes clients don’t pay because of honest paperwork mistakes. Sometimes they have their own financial problems. Whatever the cause, handling a late-paying client the wrong way can ruin the relationship.
Be selective about clients. Obviously, the best way to avoid the unhappy situation is to work only with honest clients who pay invoices consistently. Check out the company and its payment history. Research the company’s legitimacy, financial soundness and find how long they’ve been in business. If they’re a new venture, ask about their financial backing and consider requesting a deposit or partial payment upfront.
Set expectations. Establish expectations before you start working for clients. Determine their primary objectives, what the agency will do to achieve results, and how you’ll measure PR results. .
Create a contract. Contracts can protect agencies and freelancers from deadbeat clients. Ideally, contracts describe payment expectations, including the payment schedule and how clients can pay. A set interest fee, perhaps 2 to 5% per month that the invoice remains unpaid, may persuade clients to pay on time and will provide agencies valuable leverage. It’s imperative for every PR agency and freelancer contract to state that results are not guaranteed and payment is not contingent on results.
Hire a lawyer to write the contract, advises Alex Perry, owner and creative director of PR firm and creative agency, Perry Rose Media. “A lawyer will know exactly how to lay out your contract, reference all parties, cover all the bases and keep your agency protected,” Perry states in the PR Couture blog. Once you have one comprehensive legal contract, you can use it for other new clients with minor changes in names, dates and work assignments. If a client wants you to sign their contract rather than yours, ask your lawyer to review their document, Perry adds. You are entitled to ask for revisions and additions.
Evaluate the relationship. The agency’s course of actions for non-payment depends on its relationship with the client. If you have a long history and this is the first payment they’ve missed, you might want to take a more relaxed approach, counsels Solomon Thimothy, founder and CEO of OneIMS, in Forbes. However, a new relationship that still lacks deep trust calls for a more assertive course of action.
Resend the invoice. Sometimes your clients just need to be reminded that the due date has come and gone. “Simply resending the invoice and reminding them that it’s overdue can get your invoice paid, or they might reply to let you know whether any external issues are preventing them from paying, Thimothy says. Send the reminder promptly after the due date. If you send the reminder via email attachment, include a polite cover note. Send the email directly to the client contact and copy the payments department.
Call them. Molly Schoneveld, co-founder of The Storied Group, recommends calling the client if two email messages go unheeded. “It is not my favorite thing to do, but it is necessary,” she says. Besides encouraging prompt payment, a phone call can obtain information about the client’s invoice processing.
Stop any current work. PR veterans recommend continuing work for at least a month after the due date for unpaid bills. If all other efforts fail to produce a payment in a reasonable amount of time, notify the client that you are ceasing work until they become current or provide satisfactory answers. Halting work can help avoid late payment in the future though it can also strain relationships.
Get your lawyer involved. Be aware that collection costs are high. If it’s a small amount, you may not want to refer it to a lawyer or threaten to move the case to small claims court, Thimothy says. If a significant amount remains unpaid, ask your attorney to send a letter and wait before turning to small claims court. Depending on the amount, small claims court may be a viable option, but many PR agency owners and freelancers question if that route is worth the effort. Nonetheless, if it’s a large chunk of cash, you may not be able to afford to let it slide. In most states, you can represent yourself in small claims court; you do not need an attorney.
End the relationship. At some point, PR agencies must decide when to cut their losses and terminate the relationship. The best disengagement letters are professional, simple and straightforward, yet polite. You may then wish to ratchet up collection efforts through your attorney or in small claims court.
Bottom Line: Dealing with nonpaying clients is one of the most unpleasant tasks for PR agencies and freelancers. While distasteful, it’s essential to address the problem directly and promptly. Well-written contracts and prompt follow-ups to unpaid invoices can help safeguard your financial interests.
William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.