So, you have a contract and it is signed by both parties (you did keep a copy right?) and things are moving along. Your client pays like they are supposed to, you do work like you are supposed, there are no problems at all with the relationship.
Until there are.
What do you do? How do you begin the process of collecting? What do legal rights have to do with anything?
Sometimes, there are cheaper and easier (and faster) alternatives to simply “turning things over to the lawyer”. So, what steps can you take. How can you make sure to prepare your case for the lawyer (if it does have to go that far?).
Even if it is simply internal, you need to make a note of everything that happens. If you are going to create a file on a particular client, make sure you are consistent. The only way to use those documents in any legal action to collect is if they are business records. You have to regularly create similar notes in the course of your business. Make it a habit. Make it a system in your business to document the file. Do it in Evernote. Do it in your CRM. Just do it.
Accurately apply fees and interest
If your client is late on payment, make sure you understand what the interest and fee structure is in your contract. You need to add interest in fees each time you send an invoice. If you don’t, you may end up having your client argue they were not aware of the fee structure, or they were not aware of the amount of money they owed. You could lose the strength of your position (that the contract says fees and interest apply). You could lose that money.
Communicate with your client
You build your business on relationships right? If so, make sure you don’t forget the relationship when something goes wrong. Sometimes, the quickest way to convince a client who is behind to pay you is to remind them you are on their side. You can’t just send them an invoice every 15 days without a note or a phone call. Don’t just turn it over to someone coldly calling everyone. If you want to continue the relationship with your client, this can go a long way. People want to pay those who talk to them. When money is tight, people prioritize their bills. This will help make sure you are on the priority list. Maintaining your relationship can help. Reach out to the client on Facebook, engage with them on Twitter. Not about the money. Just talk to to them. Comment. Engage. It can go a long way.
Remind your client what is at stake
In addition to communicating outside of the regular mailing of bills, make sure you remind a client who is behind what is happening to their account and how much it is costing them. If you are holding work for them, remind them of the work you have. Send a note that reminds them (like you would a friend) how bad this is for them and how you will do anything in your power to help them out. Be human.
You are Keeping all of this in your file right?
Don’t forget to document everything. Keep copies (even if they are electronic), so you can show what you have done.
Give them one last chance before turning it over to the lawyer
Sometimes, the simple threat of attorney action can make a client behave. As clients are prioritizing their past due bills, you can move up the list with the threat of legal action. Let them know they have until a date specific before you turn it over to your lawyer. Don’t forget to remind them of the extra fees that will be added (they did agree to pay attorneys’ fees and court costs in your contract right?). Actually turn it over when you say you will though.
Don’t make the relationship just about money
It can be tempting to make the entire relationship feel like it is about money. Do you forget about your clients until they are behind? Are the clients you seem to spend your most time on the ones who are behind? What message do you think you are sending? Build your relationship before they are behind, and you may prevent it from ever happening.
Getting money now is better than spending a lot to get it later. Make deals. Waive the interest. Offer a discount if they pay in a week. Give your clients a chance to catch up.
Turn it over to the lawyer
No, really turn it over. Once you “turn it over to collections” and the lawyer becomes involved, make sure you let your lawyer handle everything. If the client calls you to discuss something, let them know you can’t agree to anything until you have consulted your lawyer because you had to turn it over to them. Make sure the client knows there are no hard feelings about it, but you have to consult the lawyer. You can inadvertently get yourself in trouble by cutting the lawyer out of the final settlement. If you settle for an amount of money, without speaking to the lawyer you could forget something, or waive some right you needed to protect. On top of all of this, you could end up settling for the amount of money you owe your lawyer. Remember, most lawyers collect on a contingency. You will owe your lawyer if you collect once they have started the file. If you do not consult with them before taking some amount of money, you may end up paying everything you get to the lawyer. That is not in your best interest. Make a quick phone call to the lawyer. Make sure everything is okay. If you don’t, your lawyer could have to collect from you, and nobody wants that.
Lawyers need facts, so create a file. More than that, you need to try before simply sicking the lawyers after your clients. You can destroy a relationship by not talking to your client before turning it over to the lawyer. Of course, sometimes, that may be okay. You may be trying to get out of a bad relationship with a client, but you need to make a calculated decision to do that.
Remember, your legal rights are good, but they are not the only option. Sometimes, the best business decision is to treat your client as you would like to be treated if you were behind.