Past Due Invoices? How to Make Sure You Get Paid

How to Collect Past Due Invoices

Past due invoices sap your motivation. You work hard to build things your clients will love. If they leave unpaid invoices it can feel like getting punched in the gut. Learn to identify clients who likely won’t pay invoices, use technology to get paid fast, and how to manage the collection process if needed.

In the two previous posts on invoicing we focused on the more gentle side of handling invoices. In “Deliver Invoices Your Client Will Love”, we talked about that precious moment when, after weeks of collaboration on a creative project, you hand your client an invoice. We gave tips on how to do so respectfully, keeping in mind design, device, and delivery. In our next post, “Typography, Color, and Format”, we dove into the psychology of design to help creative agencies entice their clients into paying on time.

Both posts focused on ways to curate invoices that make your client want to pay on time. Today we focus on the hard reality of past due invoices — examining the etiquette of what to do when your clever invoicing ideas don’t pan out, when your clients just won’t pay.

Dear Client: your past due invoices sting especially bad for us creatives

Collecting unpaid invoices is the all-too-familiar plight of freelancers in every field. When you’re already the sole person in charge of ideas, execution, resources, finances, sales, and marketing, having to remind clients to pay you is, quite honestly, irritating.

The only solace many freelancers find is that they are not alone. At https://www.worldslongestinvoice.com/ you can enter the amount of debt owed to you and watch it pile up collectively with other freelancers into a horror of Alfred Hitchcock proportion. Maybe you will feel better? Probably not — past due invoices suck.

For those of you working at creative agencies, count yourself lucky. You have a support team to make sure you get paid on time. However, even when you work on a team, there is a lot of independent work that goes into a creative project. When you’re a creative professional, you’re sort of always freelancing about: sketching out ideas at home, putting in unpaid hours adjusting finishing touches to projects, working at odd hours of the day.

Therefore, the finished product is not just collected hours spent in your office, it’s your own imagination put into physical form. It may be hard to turn down clients, particularly for small businesses, but your mind is your work. Don’t let clients reduce you to an past due unpaid invoice.

The first thing you can do to avoid a debt collections agency is assess clients with a critical eye, like we lay out below.

3 questions to evaluate prospective clients — step one to avoid past due invoices.

  • Did they mention they were on a tight budget? You can turn down every client that only has pennies to offer you. However, keep in mind that the giving back to the “little guy” might help you build your reputation. Put a contract in front of them and see if they can commit to their budget. If they sign it, it’s the best you can do. If they hesitate, you need to assess the potential losses: time, money, resources, employee burnout … worth it?
  • Do they have a history of late payments? If you worked with them before, you should know the answer to this. Here’s a tip: save everything. You don’t want to forget who didn’t pay you for 6 months because you deleted their e-mail folder. Saved conversations can be future ammunition. If you have never worked with the client before, ask around. Google them. Talk to your friend next door at the other creative agency. Reputations for past due invoices don’t disappear overnight.
  • How important is their business to the success of your company? If you see red flags and decide there is a great risk that the client is financially unreliable, ask yourself the above question. Do you want this project on your resume? Is there something else gained from taking on this project besides money? Perhaps you’d like to prove you do work for non-profits. If the client’s name is not important to your resume, then say goodbye.

Warren Buffet agrees, “The difference between successful people and really successful people is that really successful people say no to almost everything.”

A simple contract like this one is necessary for every client. At bare bones, they must at least sign off on paying the presumed amount $ after days from receiving the invoice. Contracts don’t have to be scary legal agreements written up by fancy attorneys. Websites like RocketLawyer and FindLaw offer advice and templates for writing up contracts.

Some clients and large projects, however, will need tighter contracts. After assessing the prospective client with the above three questions, throw some reigns on them if you deem it necessary. Ask them to pay half up front, or pay in segments, or pay all upon signature of contract. If you asked for money in a gentle way, like we suggest in “Deliver Invoices Your Clients Will Love”  you don’t need to be ashamed of asserting it to be on time.

Once a contract is set up, the next step is setting up a payment plan that works for your benefit.

Take “pay upon receipt” to the next level. Use technology to eliminate past due invoices.

In an ideal world, once a client reads the words “pay upon receipt” on the invoice, cash appears in your hands. Unfortunately, unless you work in the foodservice industry, that is not going to happen.

But don’t settle for checks in the mail, because it doesn’t actually take 2 weeks for a check to arrive from a client whose office is 20 minutes from your business. In 2017, paper = procrastination.

Let technology push your client along to pay you. There are several money transfer apps that can guarantee money is on it’s way when the client claims she sent it.

One such app is Google Wallet. If you already have a gmail account, the set-up of Google Wallet is simple. Use the app to compose a message, select the amount you’d like to send or request, and select the recipient. Straightforward and aesthetically pleasing, Google Wallet is user friendly but a little slow on delivery, averaging about 3 days to transfer funds.  

Another app is called Square Cash. This app is similar to PayPal. It provides a third party to collect both side’s banking information to transfer funds securely via an e-mail template. Square Cash is one of the fastest payment options in the market, averaging about 1-2 business days for delivery.

Finally, there is Venmo. Like Square Cash, Venmo is fast. Like Google Wallet, Venmo is user friendly. You just select an amount and send it to whoever you’d like (as long as they are also using Venmo). Best of both worlds? Not quite.

For one thing, Venmo doesn’t deliver money straight to your bank account. Your balance accrues in your own Venmo account, and you can use it to pay other friends. You can “cash out” the money in your Venmo account to your personal banking account, but it’s an extra step.

The other catch is that Venmo is half money transfer app, half social media account. You have “friends” on the app and you can choose to make your transfer public or private. Maybe you want to boast how much your clients are paying you? But probably not ?.

Each app has a slightly different spin, but they are all free for debit accounts and relatively easy to set up. If you really want your invoices paid on time, give one of these apps a try. You can require all of your clients download Google Wallet, for instance, since most people have gmail or G Suite accounts anyway. You are likely to see a reduction in time between invoice delivery and money in your wallet.

What to do when they still won’t pay invoices

You asked them nicely. You made it pretty. You watched them sign a contract. Still, no money.

It’s part of our human nature to be worked up about losing money. Before you run to the small claims court, assess the contract. Did you stick to your side, and were the deliverables delivered on time?

If no, you owe them some leniency.

If yes, it’s time to take action. They may be your client again someday, and you don’t want to send them signs that past due invoices are ok.

First, send them a friendly e-mail reminder. This could possibly have the same design and font style as the invoice you so carefully crafted to keep the same “we’re in this together, thanks for the collaboration” kind of feel.

Be gentle. Think about your own experience. Invoices do get lost and forgotten. I have accidentally had past due invoices because I was traveling or focused on a big project. A gentle remind can go a long way. 

Still no cash? Lessen the fun graphics and designs, bring the contract they signed to the forefront. Highlight what they agreed upon, and remind them that you stuck to your side of the deal. Here’s an example of a past due notice that is straight to the point.

When and How to Take Legal Action for Past Due Invoices.

The next natural step in the process is setting an ultimatum. There are some definite downsides to threatening action, so consider repeating the above step before sending a final notice to the client.

If you feel ready to take action to get paid, here are some things you can do:

  • If relevant, withhold the work you created for the client. Take down their website. Cut their ad campaign. Unless they pay you, the work is still yours. However, this could also be a PR disaster, particularly if your client is well known and it is common knowledge your agency worked on their campaign.
  • Go to a small claims court. Filing is inexpensive, and you don’t need a lawyer. The downside is that there are limits to how much you can claim. Depending on the bill, you may come up thousands of dollars short of what was originally owed to you. Or you might lose.
  • Hire a debt collector. They can put time and resources into the pursuit of debt so you don’t have to waste yours. Debt collectors are expensive,  and not well regulated. Their goal is to collect something as quickly as possible. You risk pouring out more money and possibly legal trouble. Do your research.

All three of these options will taint relations with that client. It’s not worth it to set such ultimatums if your relationship is important, or/and the fee isn’t too grand. If the debt is large and you’ve a high level a frustration, it may be  gratifying to pursue these options.

Finally, Protect Your Creativity.

If you’re a creative, it’s in your nature to respect yourself and your work. Don’t let people walk all over you with past due invoices, but don’t let their problems consume you either. This may sound more like relationship advice than business advice, but too many people waste too much time stressing about past due invoices.

As Christina Gillick suggests in her article “Unpaid Invoice? How to Make Sure You Get Paid”, the answer may be to let it go. You’ve done all you can do. Like we said earlier, your mind is your work. Sometimes you just have to keep working. The best way you can help yourself is by setting yourself up to think about your project, not your paychecks.