Ever have a client default on payment?
 

Hi, my question is for some of the more experienced freelancers & business owners. Has anyone had a client default on a payment, or be very, very slow about payment? How did you deal with that? Thanks for any answers.

Yeah, I have had one person skip payment, after driving 3 hours down, 3 hours back, and using my tapes I had to have overnighted because it was short notice.

I sent several emails, and always got "the check is in the mail" line. I guess there really isn't anything I can do about it...

Thanks for the heads up

Mark

Wow, hehe. Thanks for the laugh, sorry it was at your expense.

Since I am new to this, what is the procedure? Do you mail the product (say, a DVD) then wait for a check or do you insist on receiving payment before delivery, or something in between?

Actually you should get half when you both sign the contract. Then they get the final product when you get the rest of the $$$. If they are local then it makes it much easier. Then you can make the exchange in person. If not then you bill them. But at least get half up front in your contract. This way you never end up empty handed.
Mark

It is our policy that for wedding gigs, we do not provide services witout full payment in advance. Suppose the B&G break up in a week, now they don't like each other and have no desire to see the 5 hours of bliss that they had on their wedding day.

If it where a corporate gig, that's different. But still payment should be provided after all parties find some comon ground as to the final product being provided to the customer.

Yeah... he's in your neck of the woods.

I use e-mail for everything too, but would probably make some phone calls in a case like this. It's a lot easier to blow someone off by e-mail.

It is a corporate client & I had done lots of work in the past for them; so credit had been established, so to speak. We had been foregoing the 50-50 terms and contracts for some time now (which was apparently not too wise, but hindsight is 20/20). I really can't see them totally defaulting, but since it is a large bill I think I'll at least discuss it with a lawyer.

A letter from an attorney sometimes makes a world of difference.

You want to make an effort to collect and document it carefully. If you cannot in the end collect there are tax implications that will help ease the blow. On federal and most state returns a bad debt can be taken as a deduction, but you have to be able to prove that you made a good faith effort to collect.

I'm not an accountant but I think you are referring to an entity that is using accrual accounting method, not cash based. In cash based accounting you don't count a sale as income until you get paid. So, if you don't get paid all you have is your expenses as a deduction.

Jim, you are right. I should have noted the accounting method issue. Ben does not say what method he uses.

Here it is from the horse's mouth, so to speak:

http://www.irs.gov/taxtopics/tc453.html

Cash accounting method. Thanks for the info, I had a close call there and will return to more business-like practices of 50/50 & maybe credit card # in the future.

I have been stiffed twice in the video business -- both clients, I later discovered, had multiple civil collection lawsuits against them from individuals, banks, hospitals, and the state. Other clients who have been slow to pay (but eventually did) have also had problems paying their medical bills. I have only searched the civil court records. But, I wouldn't be the least bit surprised if the bad apples were listed in criminal records as well. When evaluating new clients, it never hurts to do a free search of the public records. It can potentially save you from a lot of trouble later on.

Live and learn. When I started my business (design, not video), I would bill after I thought the client was happy with the end result and already using it. I got burned twice in the same month _two different clients_ in the first year.

I started requiring 50% down, allowing the client to login and preview the final project on my website (usually embedded in locked and domain seated Flash), then deliver ONLY after final balance is paid. This has worked out fine since 2000 and I haven't had any complaints, though several clients seem reluctant at first. I think they ask other designers and get told the same thing, then they come back.

After talking with several other small business owners in my area over the years, I am pretty sure this is the norm - 50% down, balance due before delivery.

Contracts are also very important and you really need to stick to your contract no matter what. Make sure there is a clause about additional costs for work outside the scope of the contract. Occassionally, you may need to remind your client to re-read certain sections of the contract they signed (when they start asking for too many "addons" and/or changes to the original scope of the work). To us small business owners $500 may seem like a lot of money, but to me it was money WELL spent to get a local attorney to draw up my standard design contract (I just change the same one as I need it for each client). When I start contracting video work, I will certainly get the same attorney to draw up my new standard video services contract. Laslty on contracts, go into strict detail at the opening of your contract to describe the scope of the project. This is necessary to maintain the boundries of the amount of work you have agreed to.

Wow?!!?! How did I manage to turn that post into a contract post?? Sorry - just thought it was important. I see too many people not using adequate contracts or no contracts at all.

So, the rules for me are:

1) VERY detailed contract in regards to the scope of the work to be performed

2) 50% of the total estimate to be paid at time of contract signing (non-refundable once work begins)

3) Balance paid in full before delivery of finished product

4) NO Exceptions

Even delivery after balance paid in full can be an issue.

I had one client pay by check after the shoot. The check bounced. I sent him reminder emails every day with a PDF invoice the max size he'd email account would take before bounce. He made three payments over the next year for the full balance and even added extra money on the last payment as interest.
________

I was a freelance editor working 2 months at a major post production house on a well established national tv show. They'd only pay at the end of the period but I considered them trustworthy given their very long history and the history of the show. 3 months later I still haden't got paid. I finally called them and told them I was going to their lobby and pick up the check. If not there I would then walk into their accounting department. I got there and the lobby was empty, the receptionist gone, the security guard handed me the check with full payment. Given the number of freelancers they hired and the show involved I suspect I wasn't the only one making such demands and they were probably concerned about a daily stream of angry freelancers visible to their regular client base.

________

I was senior editor at a major post production facility (national clients and major cable networks did work there) that, sadly, made all the typical competitive mistakes that drove them into financial hardship (I'll list those in another post). After a few years they began to slip a day beyond in the delivery of paychecks every couple of pay periods. They eventually owed me a significant 5 digit amount. They filed for bankruptcy, owed the bank and the IRS a huge some of money. Both get paid before the employees. Employees got nothing.

With 25 years I've got more stories and even more details about the above but except for the above, I've always gotten paid.

Even though I'm not as experienced as most regulars here I've already had my share of hard learned experiences. I mostly do corporate and event (no weddings, just concert/performance type events) videography.

And in the 2 years I've been operating my business, I already got 2 delayed payment, one over many months. I was like many newbies at the time working on good faith and a very simple contract. But I quickly found out that once the client has his final product, the incentives to pay for it get lost in oblivion.

I now have a generic contract that informs all the clients prior to any work what payments will be and at what stage of the production, as well as copyrighted footage use and restrictions, predefined parameters for additional work rates and monthly interests on any unpaid balance past the deadline date. And on top of all this I provide a personalized invoice detailing all the services quoted (they will not have me working for free anymore on add-ons along the way).

I also no longer deliver anything usable before I get paid in full. Only evaluation copies with burned in time code. And after hearing Craig's story, I might consider waiting for the checks to clear before sending anything too.

Bride and Groom break up after only one week! Are you serious? I mean I'm sure it's happened but hardly a reason for asking for the full payment up front. Honestly. I hope you don't give that reason to the B&G when explaining why you ask for the money up front.

A problem world wide in all types of business.

Establish your terms of trade and make them known up front.
(I like Peter Lach's idea of a time code or perhaps a watermark 'sample' in the frame)

If the client is a slow payer emails and letters are too easy to ignore. Get on the phone and state a deadline date for payment. If payment is not forthcoming on that day phone on a daily basis saying the account is overdue. Refer to a debt collection agency if necessary.

If the client gripes and says you are hassling him tell him the power is in his hands and you promise to stop phoning as soon as payment is lodged in you bank.

Remain polite but firm and don't get involved in any arguments. Bad payers like to get you rattled. Keep your cool but remain firm.

These stories are all invaluable. The key seems to be leverage- not delivering your final goods until the bill is paid. Fortunately my last situation worked itself out, but it was too close for comfort and I learnt' my lesson.

Hehe, no Scott, but I'm just too much of an existentialist to believe that I can take 'love' to Food Lion and get my favorite cereal.

I have been in the industry for quite a long time myself and have never
been stiffed. I don't believe in net 30. I find it ridiculous. For weddings, I get paid in full before the wedding. Other clients either pay when project is completed, or I get it within 10 days.

Seeing as you know where he lives,the methods of payback are restricted only by the depths of your imagination.
First off though,if he refuses to pay up,find out where he works and call him there.Most people will respond better if you deal person to person.if they have any kind of moral fibre they will feel uncomfortable trying to constantly fob you off, and eventualy they will pay up. Email is just too removed from reality.

I got it good by a client once so far. It turns out the lady was a con artist and I only saw her again after a few years when she was on the news for stealing money from rich families by acting as a nanny. I just sort of left it after that because I felt those families really got shafted worse than I did. It was also only a few hundred bucks so it wasn't that big of a deal.

I always do contracts. 50% to book the date. 50% due upon completion of editing. Final payment must be in cash since I am giving them the finished project.

I am having problems with 2 clients right now, they haven't called me back regarding some questions I had about titles/music for their videos.

Eventually they will want their videos but I am forced to wait. I'm thinking about charging them interest if it goes past 30 days!

I try not to worry about it. When they want their videos, they will call. I'm at their mercy but I have their tapes so that gives me the upper hand.

since i don't edit, i get 50% at the time i arrive, and 50% at the end of the event, tape hand over.
had 2 clients which did not pay in the last 2 years, one was a fundraiser for a school, second a beauty pagent. the second one just contactet me after 6 weeks, and is willing to pay (i still have the tapes)

Sounds much like another thread in this forum. I won't start unsupervised work unless I'm paid up front. Too often clients delay "accepting delivery." Too often, they'll have last minute changes and additions after you've put in the time. Don't allow yourself to be in that position as a business. I have had contracts where the client pays at the beginning of each "next step." For event work final payment is at the time of the shoot. For corporate work, final payment is at start of the edit. If there are "trust" or cash flow issues they can certainly supervise and pay hourly.