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Not all clients will pay, whether on time or at all. How can you handle clients who don’t pay, especially if you want to keep them?

Clients not paying is an issue for many freelancers and business owners*. Most have had at least one case of an invoice or bill not being paid for one reason or another. But you need that money for your own cash flow issues. You’re relying on that invoice to pay your own bills, so you need to handle clients who don’t pay.

Sometimes, you’ll want to just get rid of clients who don’t pay. They aren’t worth the hassle. The invoice may not even be that big enough to worry about. Other times, you want to try to keep the client, especially if they have a history of paying on time in the past and this has been a sudden change.

So, what do you do when you have clients who don’t pay? How do you handle the situation?

Burn bridges or still work with clients who don’t pay?

The first thing you need to do is ask yourself whether you still want to work with this client, or if you’re not bothered about burning bridges. If you’ve usually been paid on time and it’s a one-off, out of the blue situation, you don’t want to burn bridges. It’s worth giving the client the benefit of the doubt, and work with them to be paid on time (to an extent, of course!).

If this is the first time you’ve worked with this client, you may not be too bothered about never hearing from him again. It’s worth using the harsher techniques to handle the clients who don’t pay.

There have been times that I’ve just stopped working for the client. They’ve sent emails to ask for updates and I’ve told them once they pay their invoice then more work will come through. There are others who I will still work with but set a strict deadline for payment or the work stops.

Here are methods to work through to get that money you deserve.

Create a series of emails

Have a series of emails or letter templates that you use to send out to clients. The first one can remain positive and polite as a reminder that the invoice is past the due date. This is best sent the day after the due date of the invoice.

A week later, send out another one with options for payment. Remain polite, but make sure you clearly give a deadline for the payment and consequences of not paying.

A week after that, it’s the final strike. Tell the client that if you do not hear from him by X date, you will take the further action (if you have decided to take that further action).

You want these emails as a template whether in your email account or in something like Google Docs. You can then just copy and paste everything and personalize for the client. The last thing you want is to spend precious extra time writing to the clients.

Stop working with the client right away

Don’t keep working with the client if they’re not paying. You don’t want to do more work, just to find out that you’re not going to get paid for that either. Make it clear that any ongoing projects will stop until payment is made.

That is usually enough to get a client to pay when there is an ongoing project. They don’t want to deal with a half-finished project! However, it is a little harder when you’ve finished the project. Whatever you do though, don’t accept any other work that comes through from that particular client until the bill is paid, no matter what the client says to you.

If you have on-going projects, make sure you have set time frames for when payments are due. With one client, I have an invoice that goes out every three months. I know the workload for the year, but I make sure I’m paid upfront for three months at a time and I don’t work on anything until payment comes through.

Check out other forms of contact

Emails are very easy to ignore. They’re deleted, and all is forgotten by the client. It’s worth looking for other forms of contact for clients who don’t pay, especially for a large invoice.

I once phoned a client directly to talk about a missing payment. It was a great chance to find out the reasons, and made it clear that I was very serious about chasing up the matter. Within a week, the full bill had been paid after that one phone call.

You may also have an address. This will be useful when you decide to follow through with the consequences.

Don’t make threats you won’t stick to

It’s easy to make threats that you will take a client to a small claims court, but is that something you’re really going to do?

There are a few issues with this. One is if you’re working with a client outside of your own country. It can be very difficult to get the information needed to take that client to a small claims court. The second is it can work out financially disadvantageous to you. Think about the costs of going to court.

If you have a bill for around $100, it’s probably not worthwhile and there’s no point making the threats. The client will know you’re bluffing. If the bill is for $1000 or more, definitely opt for the legal action. It will likely cost you a lot less than you’ll gain! This is, of course, if you have the information needed to take the client to a court of law.

It can be difficult when you’re working with clients in another country. I actually sold a debt to a debt collector in the state of a client. She hadn’t paid a $4,000 debt (and this was at a time before I know how to handle these situations) and I was able to sell the debt and get around $2,500 of it. It took the matter out of my hands and was a little bit of the money back. I learned my lesson though about dealing with clients who don’t pay.

Learn from clients who don’t pay

Whether you go to court or not, learn from this. It’s probably clear right now that you need to take some steps to stop this happening in the future.

The best thing to do is set up a milestone payment system. Take 50% upfront and 50% at the end of the project or use three instalments for longer projects. You get the money upfront for the work you’re about to start, so at least some is in your bank.

Yes, you can even set it so that you get the full payment upfront. That’s what I tend to do with my clients. I’ll have them pay the month’s invoice upfront at least.

You also need to think about contract terms—you do have a contract, right? What are the terms if an invoice payment is missed, and what are the consequences for the client? What do you do with the work already completed?

You need to handle clients who don’t pay calmly and quickly. Don’t let this go on for years. Decide whether you will take further action, and the type of action you are going to take. From there, you have the letter templates set up and can work on getting the money in your account that you are owed.

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What are you struggling with when it comes to running your business? What tips do you have when dealing with clients who don’t pay? Share in the comments below.