Collecting from a Recalcitrant Client
I did some work recently as a consultant.
Wh have a contract, I completed the work requested.
I sent the client an invoice with the hours worked as agreed beforehand, but now the client refuses to pay the full amount as agreed. They want me to reduce my invoice, and have refused to pay otherwise.
At this stage, I don't want to take them to court.
The invoice is now over 90 days past due and, as specified in the contract, I have given them notice that I intend to take whatever actions are appropriate to collect the amount due, with no response from the client.
One option I am considering is using a collection agency. If they can collectt he full amount, then I would still make more after paying their fee than I would if I yeilded to the client's desire to reduce the invoice. If they fail to pay, the collection agency will report them to the credit bureaus.
Aside from going to the lawsuit, are there any other options for collecting?
Ahhh....collection
One of the least fun jobs in consulting is collecting money from clients who don't want to pay. Your post leaves a little to the imagination. I don't know if they're disputing some aspect of the work you completed or not. Assuming they're not disputing the quality/timeliness/etc. of your work (to solve that, I've written a book that you can buy from this web site!), I'd follow this process to get your money:
Ask the client why they're not paying. Specifically, ask the people you worked directly with, not the Accounts Payable folks, who can, and often do, plead ignorance. Do they have cash flow issues? Did they end up thinking your work was worth less than the agreement? Once armed with the answer to "why", you can build an appropriate collections strategy.
If they're struggling financially, it's no wonder they won't pay you, and you may be able to work out a reasonable payment plan with them. Getting something late is better than getting nothing. And negotiating in good faith will score points.
If they're just being jerks, I'd draft a 'demand letter'. There are plenty of examples on the internet, but the point is to be very forceful and tell them what your next steps are if they do not pay or come to terms with you. Ideally, the first demand letter will be from you and will give them 15-30 days to respond. The second demand letter would ideally be from a lawyer - which is usually how collection agents do it.
Hiring a collection agent is a final straw and will most likely permanently break the relationship. So - is it worth it? Are these clients well-connected in your industry? Is there a chance they'd hire you again or even recommend you? If you feel like you can safely break the bond and that getting the money is more valuable than the relationship, go for it. But definitely use this as a last straw.
Happy consulting, and good luck!
Casey