CIC Corner:
Collecting Payment from Your Client

by Elaine Garnet, CIC-SIG Coordinator

Hello Everyone:

Here's a problem that I guarantee you will eventually have to face. I recently added a new person to my list of clients. I did a small project for him in February and he recently invited me to work on an additional project that will begin at the end of March. I billed him a small amount for the first project, which he has not yet paid. I have two questions:

What do I do if he does not pay the first amount?
Should I go ahead with the second project and trust him to pay the larger amount next month?

Collection Suggestions

I've never had to address this problem before so I forwarded my concerns to the STC's CIC-SIG Discussion List as well as to members of our local chapter. Stated briefly, these were their suggestions:

Send a formal reminder and follow up with a phone call or in-person meeting. The timing of the reminder will depend on the terms set out on your invoice and terms of agreement.
Be persistent. Be up front and tell the client that you require payment. "The squeaky wheel gets the grease" may work better than "out of sight, out of mind."
Refuse to start the second project before receiving payment for the first project.
Hire a professional to collect the debt.

Billing Stategies

Several members made suggestions for my billing strategy and the terms of my agreement. For example:

Determine the preferred format for billing. I send my invoices by e-mail in the form of a Word document or a PDF. Some clients may prefer invoices to be sent by fax or snail mail.
Set out the terms of payment clearly at the onset of your relationship. Thirty days is a typical pay cycle for many companies. After determining the length of time you are willing to wait, clearly state the interest that will accrue on late payments. You might want to initiate a 15-day, interest-free period.
Build into the terms of agreement a partial up-front payment or a graduated payment scheme as the project progresses.
State the reasons for which a 'stop work order' will be implemented. In other words, if the payment agreement is not fulfilled, you will stop work on the current project.

My Thoughts

It's a delicate matter and the solutions are as varied as the personalities of the business owner. Try to maintain your professional composure at all times. However, since you are also running a business you need to be matter-of-fact with the client. State that you need to be paid! Negotiating payment will likely come down to a ‘gut feeling' about the client. If he hedges, you may want to fire him and move on to more reliable clients. Learn from the experience and file for a 'bad debt' on next year's income tax. Or, take the chance that he's poorly organized, payment has simply slipped his mind and hope that a positive long-term relationship is still possible.

Sources of Information

STC CIC-SIG Web page at http://www.stcsig.org/cic/.
Discussion list at http://www.stcsig.org/cic/pages/cicsig-l.htm.
Your local CIC-SIG at http://www.stc-soc.org/sigs/cicsig.php.

Sincerely,

Elaine Garnet
CIC-SIG Coordinator

P.S. I still have not decided what to do.