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.