How To Deal With Clients Who Refuse To Pay Their Invoices
Based on a study by the Freelancers Union, greater than 70% of freelancers report having a nonpaying client. If you’re a freelancer, you are fully aware that not being paid destroys your bottom line, and can even mess up your profession if it occurs quite often. However, although recuperating the funds you’re owed is achievable, it’s not always a simple task.
Employee vs. Freelancer
The majority of the reason certain customers don’t pay freelancers comes from the character of the freelancer-client relationship. And being familiar with the characteristics of that relationship can go a very long way in assisting you to recuperate your gainfully acquired money.
You will discover specific essential variations in precisely how freelancers are paid in relation to staffs members. An employee is paid wages or a salary by means of a company’s payroll procedure, and the employer is lawfully required to give out the paycheck in a timely manner. The employer is also accountable for taking deductions from the employee’s paycheck, like federal and state taxes, unemployment insurance, and Social Security contributions.
Small businesses are also expected to pay employees for their work, regardless of whether the employee’s work is low quality. Even though a business owner or supervisor can terminate an under-performing employee, the employee must be paid for time on the job before termination.
Any time an employer can’t or doesn’t fulfill payroll, staff members can file a grievance with the state labor board and obtain help in receiving payment. If an employer files for bankruptcy, the bankruptcy court prioritizes the repayment of employee wages throughout the liquidation or restructuring process. This indicates if a company is out of business yet still owes employees their paychecks, those employees will be among the first creditors to be given payment. Additionally, employees are generally eligible for unemployment benefits when they are laid off.
Freelancers, on the contrary, are not on a company’s payroll, and therefore are not eligible for any unemployment advantages. Things become troublesome for freelancers whenever a client refuses to pay or runs out of money. Even though clients are without a doubt required to meet the conditions of a contract, the labor law protections that deal with employees do not affect freelancers.
Put simply, if a client will not pay a freelancer, the freelancer’s main alternate choice is to file a lawsuit in small claims court. If a freelancer works for an organization that goes out of business, the freelancer’s invoices are lumped in with the ones from other bankruptcy creditors and, in contrast to employees, are not given top priority.
By law, freelancers are in a susceptible position as it relates to client payments, which explains why they must be aggressive about billing and collection policies. If you don’t protect your right to the money you’ve attained, no one else will.
Common Reasons Why Clients Don’t Pay Their Invoices
- Bad Accounting Processes
- Personnel Issues
- Changes in the Payment Process
- Changes in Payment Services
- Cash Flow Problems
- Contractual Issues or Ambiguous Payment Terms
- Client Dissatisfaction
- Unethical Business Practices
How To Ensure That You Get Paid
- Going Over Your Contact’s Head
- Offering a Payment Plan
- Offering to Settle for Less Than Owed
- Third-Party Intervention
- Going to Small Claims Court.
- Going to Regular Court
Need with your invoices? The experts at LetterHub can help. Get in touch with us today to learn more about our services!
Get Started Today