Tuesday, October 26, 2010

How to Collect What's Owed to you

In October I lost 3 US clients to recession. They shut shop, all with a week's notice. It's a big blow when you realize 50% of your income has been swept out from under your feet. And it's a bigger effort to have to get newer client immediately to compensate for the loss in income.

But as you may have noticed from the silence in my newsletters and blog that I've been busy. And done it too. I'd like to share how I did it with you in my next ezine issue coming up soon. And in the meantime, here's how I collected what's due to me.

There are certain key points to remember when undertaking a project: always negotiate terms in advance, always have a signed contract outlining these terms and if possible, always get an advance before you pick up your pen.

Very few entrepreneurs and freelance agents will want to be collection agents. Or, salespeople, or marketing gurus or IT geeks. Yet, the truth of the matter is, if you are to succeed in your business, you need to know at least the basics. And one of them is debt collection.

The following are certain steps you must take to ensure you get paid your dues:

Establish financial boundaries. Don’t hesitate to bring up payment terms at your very first meeting. Most of us hesitate to ask for money, while we have no problem outlining the services we’ll offer. You are not working for free and your client does not expect you to do so. But it’s up to you to bring up the ‘money’ topic if he doesn’t.

Get it in writing. A contract or formal agreement should be established based on the terms you’ve both agreed to. The agreement should have specifics outlined and also payment terms. If you are in agreement, you may also want to include an ‘out’ clause, which lets either party break the contract on prior agreed terms.

Don’t hesitate to use terminology that is easy to understand such as ‘payment for services rendered’ or ‘retainer fees’. 

Review and ask for a signed copy. Delivering a contract is fine, but it also needs to be signed before it becomes legitimate. If need be, review it verbally with your client and then ensure you have a signed copy for your files.

Have documents on hand. Sometimes, because we pick up an ‘urgent’ project, we forget to get a contract signed and delivered. To make it easier, have a few contract and agreement copies on hand, where all you have to do is fill in the client’s details. The client can sign and scan it and return it to you by email. Once you have it, don't forget to keep your copy on file for easy access.

If you do enter into a dispute with the client, then the following may help:
  1. Designate an agent to make your calls.
  2. Consider arbitration as opposed to getting a lawyer involved. It works out less costly and usually gets resolved quickly.
  3. Distance yourself from the client who is not paying you. Let your designated associate handle this.
  4. Stay calm and focused, and do not engage in verbal or written slander or anything that could backfire on you. 
  5. Consider negotiations and be fair at all times. Get all your negotiations and agreements in writing.

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