What Can I Do If Someone Refuses to Pay for Services Rendered?

Completing a project and sitting around waiting for a payment that never arrives is frustrating and detrimental to your business's cash flow. According to "Fortune" magazine, 35 percent of self-employed people in the state of New York were paid late on at least one project during the past year when surveyed in 2013, and 14 percent never received payment at all from one or more of their customers. While it may help to know you’re not alone, staying on top of nonpaying clients is critical to getting paid fairly for the work you completed.

Some clients fight paying just to see if they can get away with it. Standing up to these bullies requires making it clear that you expect to be paid in full as promised in an oral or written agreement. Make it clear that you offered to do the work for a certain price, and you have completed your part of the bargain. Send a summary invoice that explains what aspects of the service were completed and on what dates. If the client still does not pay, send an overdue notice. Follow up with a second overdue notice before making a phone call to collect on the payment.

Your customer’s situation may have changed, and he may be unable to pay your invoice. The client may tell you he's unable to make full payment, or you may discover this fact when you make your first collection call. Encourage him to commit to an installment plan, and explain what happens if he doesn’t make the payments, such as incurring late fees or paying interest. You won’t get all of your money up front, but at least you should get the money eventually.

If your client refuses to pay or cannot make the agreed-upon installment payments and refuses to respond to further collection efforts, turn her case over to a collection agency. Collection agencies don’t come cheap; expect the agency to keep from 25 to 50 percent of the fees it collects from your client. Ask the agency to report your customer to the three credit reporting agencies.

The amount your client owes may warrant hiring an attorney to pursue payment. An attorney can write a letter demanding payment and explain what legal action you plan to take if payment is not made. If you belong to a professional organization related to your business, see if the group provides legal help. Taking your client to small claims court is another option, particularly if the amount owed falls within the limits of your state. For instance, in Alabama, you can only take a client to small claims if the amount he owes you is $3,000 or less, but in Georgia and Delaware, the limit is $15,000.

Protect yourself in the future by using an ironclad contract that includes details about your payment terms, including the fees and interest charged if payment is late. Request a retainer before you start working on the project. Bill in increments as the work is completed; if the client refuses to pay at the end, you’re out a smaller amount than the entire project fee.