How Can Contractors Avoid Late Payment?

You probably know the feeling. You have a meeting with a client; learn their work goals, complete the work and then months pass by without being paid for your work. It can be off-putting to realise a small number of clients just won’t do the right thing. So what do you do in this scenario?

Here are some tips to help you deal with late payment.

Don’t assume the worst

First off, don’t assume the worst, the client may be in a very busy period and at points like this can become disorganised in paying different contractors and freelancers. Don’t lose your cool, check they have a valid reason for having not paid you on time and give them a solid second date to pay by.

Always have a contract in writing

This is the first thing you should do when agreeing to work, have a contract written up and set clear payment guidelines including date to be paid by and the amount.

To cover yourself in case of a client not paying it can be good to write penalties into the contract, such as getting the other side to cover legal cost should you need to pursue them for payment. You could also include monetary penalties for late payment, this is entirely up to you though and will depend on the relationship you have with your client.

It can also be a good idea to secure a deposit before work commences, this isn’t ideal for all clients, but it is a good idea if you are concerned that the client will not be able to pay or will be late with their payments.

Consider alternatives

Find out why the client is late with their payment, if it is financial troubles at their end then attempt to agree a payment plan with them. If you are concerned about keeping a good relationship with the client you could even consider bartering a swap in trade or services that they could provide for you, in this situation you need to be creative.

Keep in mind that you may have to take legal action and be prepared to have all the appropriate documentation and witnesses if it reaches that point.

Make it worth your time

If you do decide to take the client to court then make sure it is worth your while, you don’t want to be spending the amount you’re trying to recover on legal fees.  Remember to factor in your time as well.

You could spend a significant amount of valuable work time on legal proceedings. Writing in the clause mentioned above into your work contract can help to secure legal fees from the opposite side.

The simple act of threatening legal action could be enough to get the client to pay up, send a letter stating that if they don’t pay within a certain date then you will be forced to take legal action. For added impetus, get a lawyer to write the letter to them on your behalf, but obviously don’t spend out of your means.

The Promp Payment Code is a scheme designed to help businesses (including contractors and freelancers) assess the reliability of their clients when it comes to settling accounts on time.  You can visit the site to review current signatories and have the option to challenge any that subsequently let you down.  You can find a summary of the code here.