Stop Clients From Becoming Delinquent

Q: I have a client who just won’t pay me. I’ve called him, sent letters, even hired a collection agency. Any advice?

A: There are few things in business more frustrating than a client who refuses to pay for work you’ve already done. A public relations firm can’t take back the press releases it sent to the media. An architectural firm can’t take back the drawings the client used to erect her building.

That’s why, says David Leffler, "The best way to deal with deadbeat clients is not to have them in the first place." Leffler is a corporate attorney at New York City’s Leffler Marcus & McCaffrey LLC.

You not only waste valuable time and money taking your deadbeat client to court, Leffler says, but also if you win, you’ll have to collect the judgment. This means locating and seizing the client's assets, costing you even more time and money.

"Clients often become deadbeats because they’ve run into financial trouble, which means that bankruptcy is not that far behind," he says. "Unless you are a secured creditor [like a mortgage lender], your chances of collecting anything significant are low."

The best way to avoid problems in the future, Leffler says, is to require your client to sign a well-drafted contract spelling out payment provisions, such as pricing terms and due dates. You might want to do a credit check, too.

You can also protect yourself by collecting an upfront retainer. "Consider building in a retainer provision that requires the client to pay in advance," Leffler says. "When the retainer runs out, require the client to replenish it."

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