How to Collect Overdue Payments From Clients

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Whether you run a small business or you're a freelancer or independent contractor, your livelihood depends on clients who hold up their end of the bargain and pay you what you're owed on time. When they don't, you have to act quickly and professionally to make sure you collect the overdue payment. Helpful practices include starting off with clearly-defined payment terms, and then talking directly with clients when there's a problem.

Your First Invoice

  • Ensuring you'll get your payments on time starts with the initial client meetings and the terms you set up at the outset. If you're setting up a monthly payment schedule, write out a contract that both parties sign, detailing the dates on which you'll get paid and how much. If you're getting paid half up front and then half later, state the specific date by which you'll receive the second half. If you're sending out an invoice, don't make the mistake of putting "pay within 30 days" on your invoices, suggests Ghost.org founder John O'Nolan. That's too long in most cases, and if the client doesn't pay on time, it means you might have to wait months to see any money. If you're serious about never getting paid late, offer a discount of 5 percent or so for clients who pay within 10 days.

Call the Client

  • If your client doesn't pay on time, don't wait to call him directly to find out what's up. Talking to the client in person -- or on the phone -- is far better than sending a reminder invoice, suggests Monica Mehta of Bloomberg BusinessWeek. Talk to the client to find out why he hasn't paid, and make arrangements with him to get the payment. Entrepreneur magazine suggests thinking creatively about a solution that works for both of you. Avoid getting angry -- even if the client gets defensive -- and try to listen to his side of the story.

Stop Further Work

  • If the client doesn't cooperate or otherwise remit payment by the date you discussed during your conversation, you're probably dealing with someone who's either not able or willing to hold up her end of the deal. If you've continued to do work for her throughout this process, stop now. Cease sending any deliveries or doing the work you've been doing, and let the client know you've done so. Inform her that you'll continue your work when you see your payment. In some circumstances this might convince her to pay up, especially if you are in the middle of a project that ultimately needs to be completed, such as a home or business renovation.

Move Onto a Collection Agency

  • If it's a small payment you're dealing with, you might have to write off that client and move on. If it's a significant payment, however, take further action when you don't see your payment another 90 to 120 days after speaking directly with the client, former collections agency owner Michelle Dunn writes in Entrepreneur. Typically, collections agencies charge you 10 percent to 25 percent of your bill to collect it, though the percentage might be higher for smaller payments. The other option is to speak with your lawyer and determine whether it's worth filing a complaint in small claims court. However, this process can be lengthy and it may take months or even years to see your payment.

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