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How to Deal With Late Payments From Your Clients

How to Deal With Late Payments From Your Clients
prashanth
Prashanth26 January 2024

Imagine this: you put a lot of effort, time, and creativity into a project for a client, only to get delayed or ignored when it comes to payment. Freelancers face this common and frustrating problem, especially when working with new or unreliable clients. A staggering 87% of businesses reported being paid late in 2022. 

Late payments can hurt your cash flow, motivation, and reputation as a freelancer. Then, how can you deal with this issue and ensure you get paid on time for your work? 

This blog post shares some tips and strategies that can help you prevent and handle late payments and some communication strategies to use when dealing with the same.

How To Prevent Late Payments In The First Place?

Here are some tips to help you avoid payment delays and ensure timely payments from your clients.

How To Prevent Late Payments In The First Place?
  • Work with reliable clients
    Before agreeing to work with a new client, research their company, reputation, and payment history. Ask for referrals from other freelancers or professionals in your network. Working with trustworthy and reputable clients will reduce the risk of delayed payment.  
  • Create comprehensive contracts
    A contract is a legal document that outlines the terms and expectations of your work, including the scope, deliverables, deadlines, and payment details. A contract can help you avoid misunderstandings, disputes, and payment issues.

    Ensure your contract specifies the payment amount, schedule, method, and late fees (if applicable).   
  • Consider upfront deposits 
    For new or large projects, ask for a partial payment upfront, such as 25% or 50% of the total fee. It can help you secure income, cover expenses, and demonstrate your client’s commitment to the project. 

    You can also set up milestone payments and receive a portion of the fee after completing certain project stages.

How To Handle Late Payments?

Despite your best efforts, you may still get late payments often. Follow the steps below to handle the situation professionally and effectively.

How To Handle Late Payments?
  • Evaluate the client relationship
    Before taking action, consider the nature and history of your relationship with the client. Have they been a loyal and long-term paying customer? Have they paid on time in the past? Are they going through a temporary financial hardship? 

    Based on the answers, give them some leeway or be more firm with your approach.
  • Resend the invoice
    In case of a delay in payment, resend the invoice to your client. It will serve as a gentle reminder and a way to confirm that they received the original invoice. You can also include a note asking them to acknowledge the receipt of the invoice and update you on the payment status.  
  • Stop the work 
    If the client is still not paying the invoice after a reasonable period, temporarily stop any ongoing work for the client until the payment is addressed. 

    This can help you avoid accumulating additional late invoices and show your client that you are serious about getting paid. However, communicate this decision to your client clearly and politely and explain the reasons behind it.
  • Consider legal action
    As a last resort, consult a lawyer and send a formal letter to your client demanding payment. This can be costly and time-consuming. Therefore, you should only use it when the amount is significant and the client is unresponsive or unwilling to pay.  

    Weigh the pros and cons of pursuing legal action, as it may damage your reputation and relationship with the client.
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