Client Isn't Paying, Now What? A Blueprint Guide to GUARANTEE Your Payment

So someone owes you money and you want to make sure you can get it back. Stay tuned because I'm going to walk you through my 5-step battle plan to make sure you can recover your hard-earned cash as a small business owner. I'm attorney for creative entrepreneurs Brittany Ratelle, and I'm here to help you make sure that you can own your business in every sense of the word. Make sure you like and subscribe to this channel for more tips on how you can protect your modern small business. And as a reminder, while I'm a licensed attorney, I'm not your attorney. And so anything that you hear today on my channel or any of my other resources are just for informational purposes only. However, I hope they're helpful for you to start getting some better language and better tools in your business toolkit so that you can move more forward as a confident entrepreneur. Now let's get into it. If you are running a business, you are making money, you are selling products and services. Sometimes you have problems collecting payment, especially if you are in a service-based business. If you're a coach, graphic designer, website designer, photographer. So what are you supposed to do if you have an overdue invoice and you need that money? Let's start with step 1. Check your contract. Now, this is assuming that you have some sort of written agreement between you and your customer, and it's probably no surprise to you that me, the lawyer, recommends that everyone have a written agreement that can outline and clearly put boundaries on the expectations of what each other is going to do in a deal. It outlines things like payment, confidentiality, intellectual property, licensing, and what happens if the unexpected happens and things go wrong. If you have a contract, what I want you to do is I want you to pull it up and check for terms that might address things like payment, payment timing and payment details, if there's any language about late fees and whether you have the option to collect a late fee. Now, if your contract is silent about this, that doesn't mean that you can't collect a late fee. However, it's going to be harder because you have to look at what would be the precedent in your state or jurisdiction that's going to apply to the contract at hand. You also want to look for some language that allows you to possibly collect attorney's fees or collection fees if you had to go try to chase after payment on an agreement like this. You also want to check a contract for clauses that address dispute resolution, and you want to know what are the options in terms of if this deal goes sour, like this could be if this payment issue keeps on outstanding, what are you supposed to do to be able to resolve this business dispute? And specifically, I don't really like arbitration and forced arbitration provisions in most small business contracts, especially if the value of the services is under $10,000, because arbitration can actually be pretty expensive, even with just one single arbitrator. By the way, this is a good reason why you don't want to copy someone else's contract, because it might have language in there that doesn't apply and that is overkill for your business situation and doesn't apportion risk out between the parties. I like to use small claims court or to be able to go directly to collections if someone's not paying on their bill. And so you want to make sure there's language in your contract that's protecting you. What you don't want to do is just freak out and tell someone, show me the money, okay, Jerry Maguire style. I understand that people not paying their bills can be a really emotional thing. It can feel like a sucker punch. It could feel like someone is literally reaching out and stealing money. Sometimes invoices get lost. Sometimes you haven't invoiced a company properly, or they have net 90 payment terms. Especially if you're dealing with a larger company, it's good to understand that their accounts payable departments are these large accounting departments, and it takes them a while to sometimes pay their bills. Not that they're not good for it, they just have their own internal bureaucracy that you gotta deal with. So that's where we wanna go back to the contract and see what are the payment terms and what are your options directly from that language. And I recommend reading over that and making yourself familiar with that agreement. Step 2, if you don't have a contract, what are your options? If you don't have a written contract for whatever this deal was, whether you were selling a product or a service, you want to look to see if there's any other kind of mini contract or binding agreement or meeting of the minds, as we like to call it, that you can anchor to to show that there was an understanding between you and that certain things were supposed to be paid, services were supposed to be delivered, and that those happened. And so things that you can check are things like purchase terms. You can look at a purchase order and see if there's any fine print on there.. You can look to see if anyone checked the box during their checkout procedure and if there were any privacy policies or terms and conditions of that sale that you can fall back on. You want to look to see if there's any other generic website policies that you could maybe apply to if they purchased directly from your website, or if someone purchased from a marketplace like Etsy or Amazon or TPT, if you can go to that marketplace and see what the terms are. Now, with most of the marketplace, you usually get your money up front, so it's not an issue. But if you're selling on another marketplace for some reason, or there's a payment plan involved, we want to look to see, is there any other language. Just because it's not written in a fancy-looking contract doesn't mean that there is not a contract, meaning there wasn't an agreement and a meeting of the minds between the parties. We want to go far and wide to see is there any other documentation, even email or DMs or a phone call or a video call, especially if they're recorded, could help you substantiate and show your position and say, hey, this is what we agreed to, remember, at the very least, jog someone's memory. Okay, let's talk about step 3. It's time to reach out to the person, to your delinquent payer. So reach out and reach out again, make sure you've given them multiple opportunities. We've all been there that we have busy inboxes, things go into spam folder, assistants don't direct things into the right manner. People sometimes accidentally dispute a payment because they don't recognize the charge on their invoice, on their credit card statement, or whoever's doing their bookkeeping, especially if it's under the name of a weird LLC or something that's not directly connected to what the payment was. I see this happen all the time to my clients who are online educators who maybe set up their LLC a long time ago, and that doesn't match the name of the actual course or the program or their membership or their subscription that you got someone to sign up for in a funnel. And so when it shows up on their bank statement, they start to freak out and they're like, what the heck is this? Dispute this. I don't know what this is. It might be a situation like that, which is another reason why you want to have some language about chargebacks so that if someone does a chargeback, whether it was in good faith or not, you have some wiggle room to try to get those costs covered and you're not on the hook for it. Make sure you reach out, give people an opportunity. I like to actually quote the contract if I can in that reaching out, and it could be a more informal, but make sure you're very clear in the expectation of what What is the outstanding charge? How is it that they're supposed to pay you? Is it by check? Is it by wire transfer? Make it all really clear. And if you can, make sure you can cite the original contract with those terms and remind them again, if there are penalties, what's going to happen? What incentives do they have to really move quickly so that they get this paid on time and you can be in a cash flow positive situation? And make sure you give a firm deadline. If I don't see this by this, or if I don't hear back from you by this date, this is what's going to happen next. Step 4: Demand letter. These are also known as angry lawyer letters, and these are more formal letters that talk about this is what's going to happen. This is like the last stop on the train before we actually take some sort of legal action. So in your demand letter, you're going to be more formal and serious. Again, you're going to quote the contract if you can. You also might quote applicable state law if there was a breach of contract of payment. If you can cite some UCC code, we want to pull in any of those other details that we found through our other steps. Just to let you know whether it's fair or not, attorney-drafted demand letters are taken more seriously. And so if you've tried some of these other steps and the person has stonewalled you or blown you off and it's enough of an amount that it means something to you and it's not something you want to shake off, may be worth at this point reaching out to an attorney, having them draft one for you and sending it on their letterhead. When I've sent these for clients, it's magical. Sometimes we get payment the next day. They find the check, they find the invoice, and the money comes in like it was supposed to in the beginning. And then let's talk about step 5, the follow-through. Like I said, in that demand letter, we want to have those same details that we did in step 4 of what's going to happen if this doesn't happen by this date. Make sure you give a clear call to action and what your expectations are if you don't get certain amount of payment, or even communication to set up a payment plan. Sometimes people have gotten in a rough spot financially, and while that's not your problem as your business owner, if you can allow and set up a path that there's a way for them to make hole on the contract or the agreement, that could be a better way for you to get some sort of payment and some sort of movement forward instead of some people who, because they like to avoid conflict, will just bury their head in the sand and be embarrassed about it and not contact you at all. If you can make space for people to say, hey, if you're in a different financial situation, if something has changed, please let me know if we need to set up a payment plan and even pay a little bit something every month to get people moving forward. That's your prerogative as a business owner and how you want to run your billing. Just from a practical standpoint, from a customer service standpoint, I can just tell you that can help smooth things over and actually get people to answer your emails and even just start a dialogue on what's really going on here and how can we fix it. With step 5, that's where we're going to have that follow-through. That may mean that you actually file a claim in small claims court, or you begin a mediation or arbitration, or big people court, right, like full-scale-on litigation. Just as a reminder, no matter how many times you watch Law Order: SVU, you are probably not emotionally and financially prepared for how expensive and time-consuming real litigation might be. Small claims can be a really great option. A lot of states don't even allow attorneys in small claims, and that's really set up for the normal business owners can represent themselves. You go in, it takes half a day, it's a small filing fee, you lay out your case, the judge listens to you, they listen to the other party, and they make a snap decision right there, and then you're on your merry way. It can be a really fairly easy way for you to get recovery up to a certain amount. Some small claim courts are under $10,000, but some go all the way up to $35,000 in recovery. Just depends what the issues are. And then as another option and tool that you have is working with a collections agency or a debt recovery, and they're going to be the ones who will take over the debt and then go after, and they will use a combination of some of these tools to try to get recovery for you. And then they get a commission based on the recovery that they get for you. I hope that's been helpful as we've walked through some of the options that you have. If you are due money and we want to get some of that money back into your pocket, if you want more information on how you can get a good solid contract that can outline all of these steps and set you up so that you are protected from that 1 to 5% of crazy clients that are just not going to pay their bills, make sure you head over to creativecontracts.co. That's my curated legal template shop that gives you solid attorney-drafted, color-coded documents, step-by-step videos to make it super easy to get you and your small business legally legit. Thanks for being here. Make sure you like and subscribe to get more legal tips from me, an attorney for online entrepreneurs just like you.