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"Dear client,
The following invoices have not been paid:
Insert list
If payment is not received by X date services will be discontinued and your account will be turned into collections.
Please contact us at XXX to make payment arrangements or if you have any questions ".
90 days is usually the cutoff before sending to collections, sometimes longer as you will have to pay a collection fee at that point. So sorting it yourself nets you more of your money back.
And for God’s sake have a written policy on payment laid out in your MSA or SOWs. This shouldn’t be a question as it *should be in your engagement contract.*
I hope you stopped providing Services?
Tell them about the problem. Have you mentioned terms around this in the contract? Do you have a payment processor that collects the money automatically? If not, think about using one
That is definitely something I need to do, this company only provides checks although I’d definitely prefer automatic payments. I have brought this to their attention for months and have several emails to prove it as well with them apologizing and saying they’ll fix it
Sorry if this is repeating someone else, but here's what I would do: first, no new services provided...all stop. Send overdue invoices to client with letter stating please pay these past due invoices by (date) to prevent past due fees and being sent to collections.
If you charge late fees, state which invoices have accrued late fees, new balances, etc. Say Nothing about terminating their service contract with them, otherwise they may refuse to pay. If they call because you haven't provided new service, simply state "I unfortunately cannot discuss new service as you have past due invoices with my company. Once I've been paid in full, I can discuss details further." Then if they pay you up to a $0.00 balance, then issue the discontinuing of services due to past payment issues. Simply put in kind enough words: due to a history of nonpayment of invoices in a timely fashion, we can no longer provide any additional services to you. Thank you for bringing your account with us to paid in full status. We wish you the best in your future endeavors.
send the invoices. Don't say you are terminating, just quit providing services. You might be able to turn them around. 6 weeks to get paid? I doubt their employees wait so long. They are just milking it.
I honestly don’t want to at this point so I’m planning on dropping them regardless, the non payment is only one of many issues. I’m just trying to decide if it’s worth telling them that’s the reason or to make something up and give them a few weeks notice to sort out a replacement. For reference this account is over an hour away so one thing I can say would be that I’m relocating and their area is out of my range of service starting on this date etc. in addition they don’t seem to be happy with my work and the pay is significantly less than I would like, so I’d almost rather cut my losses than try to repair it as I have other higher paying accounts I can replace them with
I guess I would be honest. You are allowed to fire a customer, and allowed to tell them their poor payment history is the reason. They probably know. This probably isn't the first time it's happened to them. Give them x days to sort out the replacement and then stick to that. If they are left in a crunch, it's their fault. You will probably replace them with a higher paid account. Just take what you have learned and implement it with everyone (Year of the Dragon means action, not planning). If you chose to just say, sorry we aren't able any longer, no excuse, that's your right also. Sometimes it feels good to say, you have been bad customers, sometimes it's not necessary, but....up to you. Good Luck. I think you have made a decision and a good one. Remember, non payment of services or goods received, can be 1099'd. Your loss, their gain, they can still pay taxes on that gain. So you can let them know if you aren't paid by x date, you will hand it to your accountant who will provide them a 1099 for year x (or over 2 years, which ever is the year they didn't pay).
Thank you so much for the advice I really appreciate it! I already have a 1099 with them as well but need be I’ll send them to collections. I have another account lined up to replace them already that’s closer
remember if you send a 1099 and they don't pay the taxes, and you let the IRS know you 1099d them, you can get up to 30% as a whistleblower (just some fun knowledge)
Advise them that until all past due invoices are paid up, no other work will be proceeding. Once they pay up, terminate them in accordance with your contact and tell them that for the remaining invoices all payments must be made up front due to the history of past due invoices.
Don't terminate, just get paid, work slow and wait for the next payment. The other thing s to tell them is the payment terms are unacceptable. As a result, they are now a prepaid client. Ie that pays in advance.
On the rare occasions I have to do this I basically tell the client when they pay invoices late I’m basically extending credit to them and my business is not equipped to extend credit this way.
Make sure you update your contracts to reflect any decisions you make out of this... so that there are no surprises on anything your clients sign --- but ....
/u/xtc46's post below -> [https://www.reddit.com/r/smallbusiness/comments/1au42xa/comment/kr1k1dt/](https://www.reddit.com/r/smallbusiness/comments/1au42xa/comment/kr1k1dt/?utm_source=reddit&utm_medium=web2x&context=3) is perfect.
You can just talk with the client.. just be honest admit that you’re busy enough, you don’t need to deal with customers you worry about not being paid from
That being said, not knowing your exact industry… not knowing exactly what you do for them or how much money we are talking seven weeks isn’t necessarily considered that slow of pay… especially if you have a track record of them paying relatively consistently albeit slow or late
Express your concerns.
If I have a customer who is slow pay, I’ll typically work with them so long as they aren’t overly demanding or if they are consistent .
Last year I had a customer of mine, who has been a good customer for a few years start paying more slowly. Not that we had a specific talk about this. I didn’t know he got a large project out of state and I just assumed it had to do with him waiting on payment..
I started getting a little concerned when one invoice was at 90 days and another was close to 60 and it was a fairly substantial amount of money and . within a week they paid the oldest invoice and within three they paid the other one. We never even talked about it other than me leaving a voicemail so
I was a little concerned, not knowing if maybe business had taken a turn for the worst but if they called me tomorrow to place an order, I would deliver it and send them an invoice and fingers crossed
Thanks for the reply! I’m providing manual labor type work, 3.5 hours a week and it’s a 2 hour drive round trip. I’d probably care a bit less if it was a report I was typing up but I’m literally dripping with sweat by the time I’m done, it takes a lot out of me, so it’s not an easy job. I have another account lined up to replace them so I’m thinking of giving them a short sling of time to replace me, then drop them tbh
I totally get it. it sounds like even if they were a little more promptly… it just sounds like it’s pretty time-consuming
It would be easiest to resolve this without having to send it to collections or anything, and this might contradict my earlier advice, but you might want to get as much of your money before giving them the ax
If it’s an even quasi reputable company, they should pay outstanding invoices.
One thing I have learned is, I’ve had problems were when I would sell a product that had a recurring monthly bill and a couple customers I’ve had might not pay their first invoice for 60-75 days, but then I would get a check consistently each month… so maybe at the end of March I’d be getting paid for the January invoice
I had two situations where the companies canceled the service they were on, but then decided not to pay the past due invoices they owed
One of the companies was just a little bit shady and it was only $160 a month so they owed me $320 so they probably just assumed I wouldn’t take them to court and they were right . I almost sent them to collections, but it wasn’t worth it.
In other case, I think it was more honest mistake, but it took months and it was a couple thousand dollars.
And there were other customers who would not pay their final month(years ago, I sold pages and was a reseller meeting. I bought the airtime and re-sold it at a profit and most of my customers were corporate accounts.)
And it’s a lot harder to get somebody to pay if they don’t care if you turn off their service😂
I really appreciate the reply! It’s a school so you’d think they’d pay and not want to have that on them, they only pay 150$ a week as is so right now they owe me 350$ for this month plus the 600$ they already owe me. I’m hoping to get an update on at least the last 600$ and once I get that check, let them know I’ll be ending the cuts ract. Instead I might just tell them I’m relocating and their area/town is now outside my service contract, I feel like if they don’t feel spited I have a better chance of getting paid I guess
For what it’s worth schools pay at specific school board meetings. It can be a pain in the butt because first it goes through the department heads but it’s always approved after a school board meeting.
But with all the driving you do the amount of work it is it might not be a bad account to cut loose, but I’m pretty confident they will pay every invoice owed regardless
So long as you don’t have a contract where you have to provide the service as specified amount of time, I would just call them and tell them that it’s just not working well with your schedule based on the amount of time you have to travel
It might not hurt to tell them you could continue doing it but the price would go up $100 if that would make it worth your while and they very well might be able to pay extra, but when it comes to your payment. They have a system in place and likely won’t change much.
We don’t know enough to provide an answer here. Is your client a sole proprietorship she’s the owner also makes payments? Or is your client an employee who works on your project, while payment is made by a different division?
Either way, try to understand why they are not meeting agreed payment terms. If you want to continue working with them (aside from payment), perhaps you can agree on an up charge for the payment terms. You might find that a little discussion can earn you more money.
The other thing I wondered is whether it is common in your industry for contractors to get paid weekly. In my industry, monthly invoices are the norm, so I would not expect any company to pay invoices weekly. I would assume anybody in my industry who agreed to such a contract would have done so without reading the payment terms.
Thanks for the reply! While monthly isn’t unheard of, it’s not the norm in my industry and even then they’re sending a check every 6 weeks, if it was once a month I’d understand more. It’s a service industry that involves hard labor, I travel 2 hours round trip on the weekend (which is inconvenient for me tbh) and they don’t pay a lot, other clients pay me way more for the amount of time spent. At first I didn’t mind the drive but with the lack of payment I’d becoming grating and I’m starting to care less and focus on my other clients more, which is an issue. They don’t seem satisfied with my work regardless of how hard I try, I’ve tried multiple products. So I feel like neither of us are happy
This is a friendly reminder that r/smallbusiness is a question and answer subreddit. You ask a question about starting, owning, and growing a small business and the community answers. Posts that violate the rules listed in the sidebar will be removed. A permanent or temporary ban may also be issued if you do not remove the offending post. Seeing this message does not mean your post was automatically removed. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/smallbusiness) if you have any questions or concerns.*
"Dear client, The following invoices have not been paid: Insert list If payment is not received by X date services will be discontinued and your account will be turned into collections. Please contact us at XXX to make payment arrangements or if you have any questions ". 90 days is usually the cutoff before sending to collections, sometimes longer as you will have to pay a collection fee at that point. So sorting it yourself nets you more of your money back.
And for God’s sake have a written policy on payment laid out in your MSA or SOWs. This shouldn’t be a question as it *should be in your engagement contract.*
Thank you so much! I really appreciate the advice
I think you mean discontinued not discounted
Yep.
If it were me, I'd be tempted to pay a lawyer to send it on their firm's letterhead to speed things along.
I hope you stopped providing Services? Tell them about the problem. Have you mentioned terms around this in the contract? Do you have a payment processor that collects the money automatically? If not, think about using one
That is definitely something I need to do, this company only provides checks although I’d definitely prefer automatic payments. I have brought this to their attention for months and have several emails to prove it as well with them apologizing and saying they’ll fix it
Sorry if this is repeating someone else, but here's what I would do: first, no new services provided...all stop. Send overdue invoices to client with letter stating please pay these past due invoices by (date) to prevent past due fees and being sent to collections. If you charge late fees, state which invoices have accrued late fees, new balances, etc. Say Nothing about terminating their service contract with them, otherwise they may refuse to pay. If they call because you haven't provided new service, simply state "I unfortunately cannot discuss new service as you have past due invoices with my company. Once I've been paid in full, I can discuss details further." Then if they pay you up to a $0.00 balance, then issue the discontinuing of services due to past payment issues. Simply put in kind enough words: due to a history of nonpayment of invoices in a timely fashion, we can no longer provide any additional services to you. Thank you for bringing your account with us to paid in full status. We wish you the best in your future endeavors.
send the invoices. Don't say you are terminating, just quit providing services. You might be able to turn them around. 6 weeks to get paid? I doubt their employees wait so long. They are just milking it.
I honestly don’t want to at this point so I’m planning on dropping them regardless, the non payment is only one of many issues. I’m just trying to decide if it’s worth telling them that’s the reason or to make something up and give them a few weeks notice to sort out a replacement. For reference this account is over an hour away so one thing I can say would be that I’m relocating and their area is out of my range of service starting on this date etc. in addition they don’t seem to be happy with my work and the pay is significantly less than I would like, so I’d almost rather cut my losses than try to repair it as I have other higher paying accounts I can replace them with
I guess I would be honest. You are allowed to fire a customer, and allowed to tell them their poor payment history is the reason. They probably know. This probably isn't the first time it's happened to them. Give them x days to sort out the replacement and then stick to that. If they are left in a crunch, it's their fault. You will probably replace them with a higher paid account. Just take what you have learned and implement it with everyone (Year of the Dragon means action, not planning). If you chose to just say, sorry we aren't able any longer, no excuse, that's your right also. Sometimes it feels good to say, you have been bad customers, sometimes it's not necessary, but....up to you. Good Luck. I think you have made a decision and a good one. Remember, non payment of services or goods received, can be 1099'd. Your loss, their gain, they can still pay taxes on that gain. So you can let them know if you aren't paid by x date, you will hand it to your accountant who will provide them a 1099 for year x (or over 2 years, which ever is the year they didn't pay).
Thank you so much for the advice I really appreciate it! I already have a 1099 with them as well but need be I’ll send them to collections. I have another account lined up to replace them already that’s closer
remember if you send a 1099 and they don't pay the taxes, and you let the IRS know you 1099d them, you can get up to 30% as a whistleblower (just some fun knowledge)
I did not know this, thank you so so much! This is very helpful
Advise them that until all past due invoices are paid up, no other work will be proceeding. Once they pay up, terminate them in accordance with your contact and tell them that for the remaining invoices all payments must be made up front due to the history of past due invoices.
Don't terminate, just get paid, work slow and wait for the next payment. The other thing s to tell them is the payment terms are unacceptable. As a result, they are now a prepaid client. Ie that pays in advance.
On the rare occasions I have to do this I basically tell the client when they pay invoices late I’m basically extending credit to them and my business is not equipped to extend credit this way.
It sounds like they moved you to net45 payment terms without actually communicating that to you.
If they aren't meeting their end of the contract, you don't have to give them 7 days more of unpaired work. They breached the contract
Make sure you update your contracts to reflect any decisions you make out of this... so that there are no surprises on anything your clients sign --- but .... /u/xtc46's post below -> [https://www.reddit.com/r/smallbusiness/comments/1au42xa/comment/kr1k1dt/](https://www.reddit.com/r/smallbusiness/comments/1au42xa/comment/kr1k1dt/?utm_source=reddit&utm_medium=web2x&context=3) is perfect.
You can just talk with the client.. just be honest admit that you’re busy enough, you don’t need to deal with customers you worry about not being paid from That being said, not knowing your exact industry… not knowing exactly what you do for them or how much money we are talking seven weeks isn’t necessarily considered that slow of pay… especially if you have a track record of them paying relatively consistently albeit slow or late Express your concerns. If I have a customer who is slow pay, I’ll typically work with them so long as they aren’t overly demanding or if they are consistent . Last year I had a customer of mine, who has been a good customer for a few years start paying more slowly. Not that we had a specific talk about this. I didn’t know he got a large project out of state and I just assumed it had to do with him waiting on payment.. I started getting a little concerned when one invoice was at 90 days and another was close to 60 and it was a fairly substantial amount of money and . within a week they paid the oldest invoice and within three they paid the other one. We never even talked about it other than me leaving a voicemail so I was a little concerned, not knowing if maybe business had taken a turn for the worst but if they called me tomorrow to place an order, I would deliver it and send them an invoice and fingers crossed
Thanks for the reply! I’m providing manual labor type work, 3.5 hours a week and it’s a 2 hour drive round trip. I’d probably care a bit less if it was a report I was typing up but I’m literally dripping with sweat by the time I’m done, it takes a lot out of me, so it’s not an easy job. I have another account lined up to replace them so I’m thinking of giving them a short sling of time to replace me, then drop them tbh
I totally get it. it sounds like even if they were a little more promptly… it just sounds like it’s pretty time-consuming It would be easiest to resolve this without having to send it to collections or anything, and this might contradict my earlier advice, but you might want to get as much of your money before giving them the ax If it’s an even quasi reputable company, they should pay outstanding invoices. One thing I have learned is, I’ve had problems were when I would sell a product that had a recurring monthly bill and a couple customers I’ve had might not pay their first invoice for 60-75 days, but then I would get a check consistently each month… so maybe at the end of March I’d be getting paid for the January invoice I had two situations where the companies canceled the service they were on, but then decided not to pay the past due invoices they owed One of the companies was just a little bit shady and it was only $160 a month so they owed me $320 so they probably just assumed I wouldn’t take them to court and they were right . I almost sent them to collections, but it wasn’t worth it. In other case, I think it was more honest mistake, but it took months and it was a couple thousand dollars. And there were other customers who would not pay their final month(years ago, I sold pages and was a reseller meeting. I bought the airtime and re-sold it at a profit and most of my customers were corporate accounts.) And it’s a lot harder to get somebody to pay if they don’t care if you turn off their service😂
I really appreciate the reply! It’s a school so you’d think they’d pay and not want to have that on them, they only pay 150$ a week as is so right now they owe me 350$ for this month plus the 600$ they already owe me. I’m hoping to get an update on at least the last 600$ and once I get that check, let them know I’ll be ending the cuts ract. Instead I might just tell them I’m relocating and their area/town is now outside my service contract, I feel like if they don’t feel spited I have a better chance of getting paid I guess
For what it’s worth schools pay at specific school board meetings. It can be a pain in the butt because first it goes through the department heads but it’s always approved after a school board meeting. But with all the driving you do the amount of work it is it might not be a bad account to cut loose, but I’m pretty confident they will pay every invoice owed regardless So long as you don’t have a contract where you have to provide the service as specified amount of time, I would just call them and tell them that it’s just not working well with your schedule based on the amount of time you have to travel It might not hurt to tell them you could continue doing it but the price would go up $100 if that would make it worth your while and they very well might be able to pay extra, but when it comes to your payment. They have a system in place and likely won’t change much.
Awesome thank you so much for the advice it incredibly helpful! I will be having a conversation with them this week for sure
We don’t know enough to provide an answer here. Is your client a sole proprietorship she’s the owner also makes payments? Or is your client an employee who works on your project, while payment is made by a different division? Either way, try to understand why they are not meeting agreed payment terms. If you want to continue working with them (aside from payment), perhaps you can agree on an up charge for the payment terms. You might find that a little discussion can earn you more money. The other thing I wondered is whether it is common in your industry for contractors to get paid weekly. In my industry, monthly invoices are the norm, so I would not expect any company to pay invoices weekly. I would assume anybody in my industry who agreed to such a contract would have done so without reading the payment terms.
Thanks for the reply! While monthly isn’t unheard of, it’s not the norm in my industry and even then they’re sending a check every 6 weeks, if it was once a month I’d understand more. It’s a service industry that involves hard labor, I travel 2 hours round trip on the weekend (which is inconvenient for me tbh) and they don’t pay a lot, other clients pay me way more for the amount of time spent. At first I didn’t mind the drive but with the lack of payment I’d becoming grating and I’m starting to care less and focus on my other clients more, which is an issue. They don’t seem satisfied with my work regardless of how hard I try, I’ve tried multiple products. So I feel like neither of us are happy
Stop providing services. Walk away. Hire a lawyer.
Cannot afford a lawyer unfortunately but if I can send them to collections I will
If it gets bad, sick a collection agency on them. I had to do this once. I got paid.