Today's article is in response to a user request from my article on web design contracts.
Great! Really good article. I think it might be quite useful to outline what happens if money is not paid within the time specified - like a late fee or removal of site until payment etc.
Excellent question. So what do you do when a client doesn't pay on time or at all? Inevitably it'll happen to you too. No matter how much you guard against it, no matter how much you attempt to prevent it, you'll end up with this question. Face it, sometimes clients won't pay. It isn't because the website isn't what they wanted or asked for, it isn't because you've done something wrong, it just happens. When a client doesn't pay by the date you've agreed upon there really are only two thing you can do at that point and you've mentioned them both. However, I am going to take your question a step further and include not paying at all. What may start out as a late payment, might turn into no payment.
How does it happen?
When kick starting your web design business or writing web design contracts you likely don't think of people not paying you. I mean you wouldn't stiff someone else with a bill that you owe. So we tend to not think about the potential bad that can happen to us.
Depending on the type of client the reasons will vary. They might be subcontracting the job to you and have not gotten paid yet. Your client was premature in hiring you and giving you the go ahead to start the work. You see any number of reasons can lead to an eventual bad debt write off. The most common reason this happens is that when starting out many of us will take nearly every job that comes our way. Sometimes at the risk of not being paid. This is the case because we likely change our normal procedure (requiring the down payment or deposit).
Thankfully, I have only had two clients not pay me. The first instance I was not paid was after services were rendered for a small job, my client disappeared. I couldn't collect because I couldn't reach this person (it turns out they moved from Hawaii to Florida). The second time this happened, my company was asked to do a very quick turnaround on some 'grunt' work. When we asked for the down payment (50%) on a rather small job, they refused because they weren't getting paid until the job was done either. Instead of accepting this and turning down the job, we said okay we understand. Bad choice. Lesson learned. So what can you do about it once it happens?
What can you do about it?
Since it is going to happen, it is important to know what you can do about it. Which of the following options is right will depend largely on the amount owed. So instead of detailing all of these, I am just going to list all of the options available with some brief comments.
- Do nothing. (Not what you wanted to hear, but it is an option.)
- Charge a late fee.
- Refuse to deliver the site. (Assuming it isn't live already.)
- Take down the website. (If you still have the credentials.)
- Work out a payment plan. (Sometimes it isn't a matter of not paying on time or at all, but not paying the full amount for whatever reason.)
- Turn them over to a collection agency. (Keep in mind you'll pay for the service, but it is better than zero return.)
- Take them to court. (This is very hard to do while keeping it worthwhile, but it is an option.)
How to prevent it from happening again.
The most important thing you can do is learn from your mistakes or mine. Stick to your policy or standard operating procedure at all times, no exceptions (not even for your friends). Realize it is better to be safe by losing the job or turning one down, then to be dealing with collecting money. So here are my tips to prevent it from happening again.
- Always require a deposit or down payment. (I recommend 50% or 1/3 on larger jobs.)
- Host the development sites yourself. This way you maintain control of the site. Which means once payment is received, the site can be 'delivered' to them.
- In your contract include details on the penalties for not paying. (late fee, site removal, etc..)
- Realize as mentioned above, that it is okay to not take some jobs. After all potential money isn't as good as actual money.
- Make sure the lines of communication are always open. Speaking with a client on a regular basis will help determine their reachability.
- Play it smart. The most general prevention tip, yet the most effective. If your gut tells you something isn't right, it just might be. Cross your t's and dot your i's.
Do you have a horror story and lesson learned that you'd like to share with us?