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Having a problem getting paid?
Your customer has been paying you for a few months and your lovely prepayment arrangement and terms of business have gone down well. You think they’re happy (you have checked haven’t you?) and you are happy with the work, but suddenly the payments slow up.
If you are using KoffeeKlatch terms of business (for VAs, Trainers or Web Designers) you have got a whole bunch of useful clauses that give you all sorts of rights….so why do some people still get caught out with clients that don’t pay?
What are the warning signs?
- The client sees your invoices and chases (you know that because you track who opens and sees what don’t you?) but when you try to get paid they ask for more and more copies.
- The people who normally take your calls don’t pick up and all your calls go to voicemails.
- They still keep giving you work but it is on extremely short deadlines and way over time budget for what you agreed to do
- Despite being on fixed-fee, project, or retainer deals, they start muttering about or asking for timesheets
- You get complaints about work your client signed off on happily weeks or even months ago
These are the warning signs that your client is running out of cash.
What does this really mean?
- The client is putting more steps between supplier invoices and issuing payment due to slow cash flow (or even lack of profitability). Rather than be honest with you about what is going on they are stalling.
- Your contact is embarrassed to speak to you and does not want to take your calls because they are nervous about telling you what is really going on.
- Other suppliers are refusing to work until they get paid and urgent work is being passed around the suppliers who are still willing to extend credit.
- Your client is looking for a way to cut cost and rather than look at value for money they are simply looking at the size of the cheque they need to write.
- Disputing earlier invoices is a classic way of getting extended credit.
What should you do?
If you are using your KoffeeKlatch terms of business, come to the customer support group and we will help you familiarise yourself with all the options your contract gives you, from suspending or delaying work, to late payment charges and more. But before you rush off, check the history and the relationship and ask yourself:
- Is this something new?
- Has it happened before?
- How did the client handle it last time?
- How did you?
- Are you happy with how it turned out?
It’s a well-known truism that if you do the same thing you will probably get the same results.
And if you don’t like those results you are going to need to do something different.
One of the great things about being your own boss is that you get to decide things like this.
Are you ready to go another way this time?
If your client has a seasonal dip and this is an annual event – you could change the way you do business at that time of year – schedule your work (and payments) to avoid this dip.
If your client has always been difficult about payment, you may want to review that relationship and the rates you charge as well as gently bring them back into line.
If your client has always been a good client and this is a sudden change, you know something is wrong. It is time to ask them if they want to have a conversation and review the account. It is better for both of you if you decide to do less work for money you actually get paid for rather than having an increasing amount of unpaid invoices with all the frustration and headaches that brings. Your client will still need to take care of the money they owe you, but you can create something more appropriate going forward.
Talking about money can be embarrassing
Being in business can mean tackling conversations you would never dream of having in your social life. When was the last time you walked up to a friend and said:
“I see you haven’t bought your round in the pub for a while – are you running out of cash?”
It’s time for a light bulb moment!
When it comes to business things are different. You are not relying on your friend to pay your rent or feed your children. But clients who don’t pay can make it difficult for you to do that. There is nothing more frustrating than running out of money to pay your bills because your client has not paid their bill to you.
You have to put aside that embarassment and start to carefully plan a conversation that takes you and the client to where you want to go.
Some clients have no idea how they are affecting you
Some clients (particularly large corporates) have no idea how their behaviour impacts you and your mico-business. Not everyone who is doing bad things to you has decided to hurt your business.
Some people are so centred on their own goals and life that they just don’t think.
Others are using your money and credit to build a lifestyle for them.
They are on the beach owing you money and you are at home doing an extra project because they did not pay you.
We have seen a lot of that over the years.
Try to take this away from how you feel about all of this and start to plan where you want to be and what you need to do.
Share this information with your client
If your client is demonstrating several of the signs they are running out of cash, try sharing this blog post with them.
If you are the client and you are not running out of cash – don’t be offended. You need to know you are beginning to act like a business that is – and this could affect your credit rating in the end. Your micro business needs you to pay on time and if there is is a real problem, why don’t you talk to them in the next day or so and get it all sorted out?