Evan Carmichael explains how to handle overdue invoices: require 50% upfront to screen risky clients, then at 90 days unpaid, make a personal appeal about the impact on your business. If that fails, either let the client go or escalate to a lawyer's demand letter and small-claims court.
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How to get clients to pay. So I got a question from our YouTube viewers, Jason. Love you guys. Jason wrote in to say, Evan, have you made a video about how to get people to pay up when they owe you money? I have some invoices hitting 90 days and I'm trying to get the money and still keep the business. Any thoughts? So Jason, this is an interesting and important question. Part of this, okay, before even looking at the clients who owe you money, Part of this is one, you starting to work with better clients and doing a better job upfront in finding and working with clients who are going to be your ideal clients. Okay, and I know it when you're first starting a relationship with a client, everybody's happy, everybody's excited, you're all ready to go, and then problems can arise. And so doing a better job upfront of classifying and qualifying your clients will help you so you don't get to the situation where you're 90 days and you haven't been paid yet. The other thing to consider, again, when working with clients your next time around is getting more money upfront. I don't know what you're selling, I don't know what your payment schedule looks like, but you shouldn't just be collecting all the money at the end. Get at least half of it upfront so you have some cash flow coming in, you know that the client is committed to the project, right? If they're not willing to give you 50% upfront and they want everything backloaded, that should set off some warning signs for you to say, hey, maybe this client is not going to be a great client for me. That won't help you in your situation right now, but will help you with your future clients. Okay, and a lot of entrepreneurs have had to make similar pricing policy changes in their business because they've been burned by other clients. So nobody typically sets out and is proactive about this. We've set our policies because we've been burned in the past by other clients. Now what do you do? So you're getting to 90 days or you're past 90 days, you're following up, you're not getting a response. What I would do is probably try to reach out one last time with a personal appeal and let them know how important this is to your business. When I'm working with smaller businesses, I always try to pay before they ask for it because I know how important it is for a small company. I don't negotiate terms with a small company. If I'm dealing with a huge company, a bank or a telco or a company who I know doesn't really care about me, I'll negotiate as hard as I can. But for a small company, I usually don't negotiate that much. And so just let them know how important this is to you, how it impacts your business that you haven't been paid yet. And then from there, if they still don't respond, if it were me, I would honestly probably just let it go. I would let it go because I hate having hassles in my business, and it's not just the time of following up continuously with them, it's the negative energy, right? Think about it, when you're following up, when you're thinking about that invoice that's due and you're owed X thousand dollars, how does it make you feel? Not great, right? Every time you think about that invoice, every time you think about calling the client, which may be every day now, It doesn't make you feel good, and that negativity flows into your business, it flows into your personal life. Nothing is good. And I would just, if it were me, I would just avoid it and just let the client go and let that, you know, that money that I lost be an educational lesson for me that I won't make that same mistake again on future clients. If you don't want to let it go, okay, the money is really important to you, or You just can't let it go for whatever reason. Your next step would be to get a lawyer to write a letter. So you can get a lawyer, either it's a friend of yours who won't charge you, or a lawyer who's just for half an hour will sit down and write a letter. And this shows that you are serious, okay? Now it's going beyond just a personal appeal, and now you're not quite threatening to sue them yet, but you're making it known that it's more important, that you might get lawyers involved if they don't pay up. At this point you're risking losing the relationship, but again, I don't know how much you want to keep a client who after 90 days is not paying you, right? This is not an ideal client for you. It's better to focus on the better ones. If they don't pay up, if you don't hear back, your next step up is to either take them to court, and depending on how much you're asking for, you might qualify to go into small claims court, or you could sell your receivables. And here you're selling it to a company who's going to then hound this client to pay up and you get very little money. You might get 10 cents on the dollar, but you know, you have a little bit of cash and that receivable is off your books. But don't count on that customer ever coming back. So that's what I would do. I know it's a tough situation and hopefully you can use it as an educational tool so that your future clients, you don't make the same mistake and you start working with better clients. We've, I think all all at some point been burned by clients who don't pay us, and we become stronger for it. So hopefully you can get through this and still have your business and still do great things with your future. Believe. For those of you watching, like the video, thumbs up below. Let me know what you think. Let me know how you handle clients who don't pay up. Leave a comment underneath. You have a question for me, leave it below. And you can click on my face to subscribe to the channel to see more videos like this. Thank you so much. I'll see you soon.
