How to Actually Get Paid on a Past Due Invoice

So you landed the client, you got the contract, you read and understood and then signed the contract.

You did everything you’re supposed to do and completed work on time.

You finally, you sent the invoice to the client. But now, the due date for that invoice has come and past. Yet, your bank account remains empty. The client has not paid on time, so what do you do next?

I have had this happen to me several times, as most people in business have, and it sucks. There’s no getting around how annoying it is to have to chase past due invoices.

But don’t let a late payment turn into no payment.

In this post I’m going to share with you what to should do when a client doesn’t pay on time.

First, Follow Up With a Simple Email

While not receiving timely payment for timely work is frustrating and insulting, keep calm.

I’ve found the most successful way to get paid quickly after the invoice is past due is to follow up with a clear but friendly email.

Here is what I send:

Hey Contact,

I noticed that my invoice dated XX/XX/XX for $X which was due XX/XX/XX has yet to be paid. Do you know when I can expect payment?

Best,

Liz

It’s not super demanding but it does get the point across. Most times this simple email will do the trick and I receive payment that day or a few days after I send it.

In reality, you shouldn’t have to ever send this email, but generally the people we work with are humans and humans make mistakes.

You should be able expect to be paid on time. But it’s nice to know that a simple email will do the trick.

Often times when someone has failed to pay your invoice it’s not malicious. Generally speaking, they are not usually out to screw you over.

Chances are they overlooked the invoice or had something come up.

While their disorganization sucks for you, you do usually end up getting paid.

Second, Give Them A Call Directly

Assuming you have their phone number or Skype ID, try giving them a call. Emails are easy to overlook and ignore, but getting someone on the phone demands their 1-1 attention.

Remind them of the invoice, it’s due date, and that you sent a follow up email, ask why your invoice has not yet been paid.

In some instances, for example if they have a bookkeeper or a VA that handles their email the fact it wasn’t paid may be news to them.

If it’s not news, they should be able to tell you why it wasn’t paid. They may give one of the following responses:

“It was an oversight, I’m going to pay it right now.”

This is the best response. Or:

“Sorry, money has been tight, I’ll get it to you by x date.”

At which point, you may choose to implement any late payment fee that you’ve included as part of your contract. You’ll also want assurances from the client that this won’t happen in the future and see what steps can be made to ensure it doesn’t happen again.

“I don’t have the money.”

This is the worst possible scenario. But you have a few different options on what you want to do next.

Option 1: Demand payment, reminding them that you provided a service and they had agreed to pay you for that service and that if payment is not received by end of day (or whatever generous deadline you decide) you will have to move forward with legal action.

Option 2: If the service or work product you provided can be taken back and you can sell it elsewhere, you may choose to do so.

For example, if you’re a freelance writer and you wrote a piece that you could shop around elsewhere, you would let the client know that if they can’t afford to pay your rate, they cannot use your article. Assuming you don’t have any clause in your contract that would prevent you from selling the work elsewhere, go ahead and do so.

Third, Send a Formal Demand Letter

If the simple email or a phone call doesn’t work and you receive no response or no payment after a couple days (though you may want to give it a week) you can send what is known as a demand letter.

A demand letter is most often drafted by attorney. Though you can certainly come up with one on your own. A demand letter is just a more formal way of saying:

Hey you need to pay me. This is already past due, I sent a friendly reminder email. If you don’t pay me by XX/XX/XX day I will be pursuing the legal course of action that was outlined in the contract.

Now I know what you’re thinking….

Isn’t this what I just did with the email and call? Pretty much, which is why a demand letter is most effective if it comes from an attorney.

It shows you’re serious and have already retain counsel to potentially sue them if they do not make payment.

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Most business owners are scared enough by a demand letter to comply or  at the very least, respond.

Hopefully they will respond with your payment.

Alternatively, they may instead respond with when they can pay or an alternative payment plan. For example,  I can pay you half now and the other half at this date? Then you have to decide if that’s going to work for you.

If it doesn’t, or they don’t respond…

Finally, Pursue Legal Action

If the demand letter doesn’t work then your next course of action is to pursue the legal course of action that you outlined in the demand letter.

This may be a lawsuit or arbitration, really, whatever the contract specified.

If the contract doesn’t outline what the next step is then it is likely going to be a lawsuit. It’s generally best to hire an attorney to handle a lawsuit.

After not being paid I know it can be hard to wrap you mind around paying money to an attorney, but attorneys know the process and can help advise you on the best options.

The headache alone that hiring an attorney will save you from doing it yourself is usually worth it.

There are also lots of great law firms that focus specifically on providing services to small business owners and creative entrepreneurs, they are used to dealing with these issues

Hopefully, it never reaches the point of going all the way to court with the lawsuit. Fingers crossed that instead you’ll be paid your money long before that happens, with some kind of agreed upon settlement.

If it keeps happening, Think About Altering Your Contract Terms

If you repeatedly are having to deal with clients paying you late or not paying you at all, you should consider altering the terms of your contract.

Add Late Payment Fees

If a client is consistently paying you late, you may want to consider renegotiating the contract to include a late payment fee as part of the payment terms.

You would just include a clause that payment is due 30 days after the invoice is sent, if payment is not received a late payment fee of x% will accrue.

It doesn’t have to be a gigantic late payment fee, something like 1.5%-5% is likely plenty.

The late payment fee, just gives them a little more motivation to stay on top of your invoices and pay you on time.

I found it does the trick, I had a client that was regularly paying me late but when we renegotiated the contract, I added in a late payment fee and I have not been paid late since.

Make Sure Your Legal Recourse is Clear

If your previous contract didn’t outline what would happen if one party breached the contract (aka didn’t pay) then you’ll want to make sure you add that in.

This section in the contract should include where the legal action will take place, specifically what state and county (the jurisdiction).

Require a Payment or Deposit Upfront

To ensure at least some payment you may require a deposit up front. This is more common in some industries then in others. But a deposit up front or payment schedule can help to ensure you receive timely payment.

You can do 50% upfront and 50% upon completion. Or a certain percentage paid at particular milestones.

For example,if you’re a freelance writer you may have a payment schedule like this:

• Make 25% upfront
• Then make 25% paid upon approval of outline
• 25% paid upon submission of draft
• Finally, have 25% paid upon completion/finalization of the article

What to do if You Don’t have a Formal Contract

If you don’t have a formal contract, then you’ll need to show that there was an agreement between you and the client. A string of emails outlining the terms will work.

For example, if you emailed them something like:

Great chatting with you today, per our conversation I’m excited to write this article at around 1,000 words of $250 dollars.

Can you just confirm that is correct and what the deadline for the article is?

And they respond:

Yup, that’s right, could you please have the article done by the end of the month.

Bam, proof you two agreed on the terms.

So long as you have proof of some sort of agreement, you’ll likely follow the same steps as someone who did have a contract:

1. Send  a simple follow up email
2. Call them directly
3. Send a demand letter
4. File a lawsuit

But not having a contract does provide more push back from the other side in regards to the payment terms and even the jurisdiction for legal action.

So while not having a formal contract doesn’t mean you won’t get paid or be able to pursue legal action, it’s always best to err on the side of having a formal contract.

Bottom Line – What to do when an invoice is past due:

Hopefully, you never have to deal with being paid late, but as a business owner, chances are at one point or another it will happen to you.

Remember, your best first course of action and the easiest one, is sending friendly but clear email. So long as the lack of payment was an oversight, an email will generally do the trick.

If the email does not work you can call them directly to ensure they got the message that the invoice is late.

If that still doesn’t work, put them on notice that you’re aware that their invoice hasn’t been paid and send them a demand letter.

Your final action would be to pursue legal recourse, likely in the form of a lawsuit.

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