If I were to catalog incoming phone calls by topic, I’d guess at least half of them have to do with collecting payment on jobs. That’s why I talk about this so often. What do you do when they won’t pay?
Some people have a really tough time paying bills. With some it’s because they don’t have enough money; others just don’t like to let go of it. And some enjoy the feeling of control they get when they know you need the money. Because if you’re the one not getting paid, their unwillingness to pay can become your emergency. That’s why I hound on the topic of contracts.
While it’s a lot more fun to build jobs than handle paperwork, it’s important to do the paperwork before you start building. If you have a well-written, detailed, signed contract that clearly specifies the payment schedule, you have a better chance of getting paid.
A well-written contract clearly spells out who the job is for, where the work will be done and all other pertinent information. It both outlines and details the work to be done. It includes legal language about what you are and aren’t responsible for, and what they are and aren’t responsible for, and a number of other details. Finally, it includes a detailed payment schedule located on the same page as and just above the signature lines, so they can’t claim they didn’t see the payment schedule when they signed. We cover this in Chapter 7 of Markup & Profit Revisited, “Good Contracts Protect Your Assets”.
Some of the legal language that should be included is a statement that if your client doesn’t follow the payment schedule, you reserve the right to shut the job down. If they don’t catch up their payments in a certain number of days, you reserve the right to terminate the entire project and they will owe you for all your work plus applicable overhead and profit. The specific language is tricky, make sure your attorney approves your wording so you can stay within the laws in the state or country where you’re working. You don’t need to visit your attorney on every project. Select the paragraphs that you think will work best for your projects from Fast Track Proposal Writer and get them approved (or adjusted) by your attorney. Set them as a template in your program, and now you can easily use them for every future proposal.
Say you have a contract in place and for whatever reason they refuse to pay. Remember that people who sign an agreement and then don’t make the payments they agreed to do aren’t the kind of people you want as repeat clients. Don’t worry about hurting their feelings. Accept that you’ll probably not be able to make them happy and the odds of getting referral business from them is slim to none.
Don’t get angry, don’t make any threats. But you need to confront them. All you should say is, “Mr./Mrs./Miss Owner, you haven’t made your payment on time and as agreed to in our contract. That puts you in default. You can pay me today, or I’ll take such action as is necessary to collect the monies now due on this project.” That’s all you should say. No more. Do NOT tell them what you intend to do. Let them worry about it.
This very direct statement will often get you paid on the spot. If they don’t pay you right then, they will probably pay in a day or two after they pick up that contract you mentioned that they’d forgotten about and read the job cancellation clause. If they still won’t pay, invoke the job cancellation policy.
What if a bank is involved and is causing the late payment?
Before the contract is signed, you need to ask where they are getting the funds for the project. If they’re financing through a bank, make sure they clearly understand that your contract is with them, not with the bank. They are responsible for making sure you get paid on schedule. They need to make sure their bank will do its job, but if the bank doesn’t, it’s not your problem. It’s theirs. You have an agreement with them and only them.
You aren’t a charity, you’re a business. You need to be paid for your work. Too many people are trying to find ways to chisel contractors down or not pay at all for their work. You can put up with it and hope that maybe, someday, you’ll get paid. That’s right, and pigs will fly someday. Can you wait that long to get paid?
Do your job, do it well and follow the contract you write. Insist your clients follow the contract as well.