When Clients Don't Pay – Consulting War Stories

Also find Sean Hull’s ramblings on twitter @hullsean.

It’s a cold cold winter out there, so as they say you need money to keep the lights on? Yep, that’s true whether you’re a small business or a consultant. Everyone has to pay their bills. Or do they?

It’s an unfortunate fact of life in business, but sometimes there are differences. Disagreements about deliverables, timelines, milestones, and deadlines. But when all the work is done, there are still sometimes differences over dollars.

Over the years most of those I’ve managed to work out with clients, but there were a few that went sour. One case was with a large entertainment firm. The music business is one that I hadn’t interacted with much before. For these guys I’d done a few days work in the past, and was paid promptly. Now they were in a bit of a jam. They called me up and asked if I could help.

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These types of emergencies often come at the worst times, and I explained that I was already juggling a few other things. They pleaded for help, and I relented. I carved out a full day of time for them, explaining the day rate and so forth. While on the phone though, I expressed caution.

[quote]I understand that your issue is urgent now, what happens if your needs change in the next 48 hours, I asked? Not a problem they replied, we can use your help anyway, so we’ll book you either way. Fast forward 48 hours, work canceled & client won’t take my call.[/quote]

Great I thought, verbal assurances. That works for me, I thought.

Fast forward 32 hours, and I receive an email saying the problem is resolved, and offering a “kill fee” of which I knew nothing, and which was never negotiated or discussed.

Along comes the day of reconning, and I call the client. They don’t take my call. Shortly there after I receive additional emails. I reply and explain we should talk on the phone. Still the client can’t find the time to pickup the call.

So I judiciously put together an invoice for the work. I email it directly to finance, and CC all parties. From there I get responses ranging from disinterest to denial. Over the coming months I periodically resend the invoice, but to no avail.

Or was it? I actually feel that this experience is to great avail.

1. Small disagreements foreshadow larger ones down the road
2. A relationship between client and vendor is a mutual one. If parties can only pickup the phone when they need something, then things are out of balance already.

Sure I lost a day & the fee associated. But I gained a lesson.

Patience and polite persistence

I firmly believe that being patient and persistent wins in the end. Sometimes clients have hiccups in payroll or budgets. Keep communication lines open.

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Appealing to fairness

If you maintain a healthy relationship with your client, then appeals to fairness are normally heeded.

Appealing to promises

Emails are important to keep a paper trail of agreements. Communicate clearly and often so you know when you get derailed, and can refer back to what was agreed previously.

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Setting precedents & expectations up front

This is an important one, that freelancers and consultants alike sometimes forget. Setting and agreeing on expectations is key. Often details are in the fine print or left out completely. So ongoing communication can iron out those differences or bring them to light.

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Getting a protective deposit

If you haven’t worked together before, a deposit makes a lot of sense. Executing on this is more than a show of faith. It underlines that accounts payable is on board with your hiring, and you are now in the payments system.

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Sizing each other up

Websites provide the first representation of you and your client to each other. How you carry yourself and how they feel meeting them face to face is important as well. Ideally you’ll meet each other at the client’s offices, where you may meet others on the team, and put names to faces. At the very least a skype call will go a long way as well.

Managing spend – communication along the way

Keep a close eye on invoices. If a client is getting behind, resolve it before continuing to work. Deadlines are mutual in a business relationship. Yours to complete work by a certain date, and theirs to pay by an equally agreed upon time.

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Never go to court – defer to the handshake & gentleman’s agreement

I know the lawyers out there may think I’m naive. But I’ve been in business a long time, and I believe a handshake means and says a lot. Also common sense language & contracts, in the form of emails and so forth are better than heavily legalese ones that no one but a lawyer can understand.

What’s more going to court has a huge cost in time & stress. Don’t go that route. I also think it appeals to clients knowing that you’re not the litigious sort.

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  • Rational Thinker

    I disagree on never going to court and the hand shake as their word. I will not do business with anyone who will not sign a letter of agreement or a contract. If we can’t find common ground before the work is done I assure you we won’t get paid after the work is done.

    My time and talents are valuable and I don’t donate it without my permission. If I perform all that I promised I expect to be paid as promised and I will have a paper/email trail to back it all up. I will sue and I will win, some clients need to know that going into an agreement.

    I think it is a mistake as a business owner to be too nice or accepting of theft of services, if we sold cars and some one came onto the lot and stole a $40k vehicle we would call the police. If someone steals $40k of my services they will be sued. We are professionals and not doormats. There are too many people who are willing to take advantage of small businesses and consultants because they assume we will not take action against them.

    It is in our best interest to discuss our fees in the first phone call and to get all questions and concerns out of the way asap. When you have cleared all the costs and expenses write up a letter of agreement, email to the person who has the authority to sign and do not do any work until you receive the signed agreement. It will save a lot of time and grief. Professionals and honest clients do not take offense by asking for commitment.

    • hullsean

      Rational, appreciate the comments. Certainly it’s important not to be a doormat. That’s for sure.

      What I was getting is, maintain a good relationship, don’t let things go unpaid too long, and work hard to resolve differences. In the end it’s the way to go.