Contractors' Questions: How to get paid the other half of my fee?
Contractor’s Question: I’m due to send a payment reminder to my ‘Plan B’ client who is overseas and has paid half my fee, and was meant to pay the rest in instalments but has stopped replying to emails.
Two instalment ‘due dates’ have passed and the third and final instalment is likely to follow suit, because that’s the payment for when the work’s complete and I release it. Thing is; once I release the work via another IT contractor who I get on with, the work becomes theirs and they’d have no incentive to pay. They’re a good client but I’ve got a bad feeling; please help.
Expert’s Answer: When an expected payment date passes with little or no contact from the client it can be more than a little disconcerting, especially if the client in question has traditionally been a valued customer and more importantly, a prompt payer. But it isn’t unusual in for clients to pause or delay progressing a project for any number of reasons without necessarily feeling they have to keep the contractors they engage ‘in the loop’. That said, you are right to be concerned about the potential implications for your own cashflow should the worse happen.
Luckily the fact you have a good relationship with the other contractor means you are in an excellent position to keep abreast of both current developments and crucially, any issues or problems that occur after your part in the process has ostensibly ended. As for how to proceed, you do have a number of options available to you currently that do not require any kind of formal escalation to debt collection or legal action.
You say that the remaining 50% of the fee is due to be paid in instalments once assets are released to the other contractor, and for the purpose of issuing you the following two recommendations, we will assume that the work has not already been completed and/or released to your contractor colleague. In addition, the following solutions are provided on the assumption that your contract allows for them. Please check your contract carefully to ensure you are free to pursue these steps, as some contracts explicitly state what action must be taken in the event of non-payment.
The simplest and most immediate solution in terms of resolution, is to pick up the phone and call the client (time zones permitting) to find out exactly what the current state of play is. You can use the call as a ‘customer service’ call initially, to confirm they are happy with the work done and that everything is progressing as it should. If it is, then this gives you the perfect opportunity to gently remind them of your payment terms and the like. If this picking up the phone option isn’t possible, or you can’t reach the decision-maker, then your next best option:
Do nothing -- at this stage -- and wait a little longer for the end-client to come back to you. If the work hasn’t been passed on to the contractor then presumably they will contact you to discuss where the conclusion of the work is. You can legitimately state you were unsure of how to proceed given you had previously received no response to your emails. Again, this gives you the chance to sound out the client for any potential pitfalls that may impact your own payments. Once the client has been in touch and assuaged your fears, you can then move forward.
Overall though, our preference is Solution 1. When following this course, make strenuous efforts to confirm your payment is free of queries and that it is being processed. If not provided, press for a firm date of payment from the client and get this confirmed in writing (on email).
If that doesn’t work, and Solution 2 is too passive for your liking, then we’d recommend:
Explain the situation to your contractor colleague and ask for their help. Chances are; if you are struggling to secure payment now, then this other contractor will eventually be faced with the same problem. Plus, as the old adage goes “a problem shared is a problem halved” and that is especially true in cases like this.
If the contractor is willing to assist, we would suggest sending a formal notice by email reiterating that any Intellectual Property does not transfer until payment is made in full, and back this claim up by including the relevant contractual clauses. Copy in the contractor and make it plain that you retain the IP and will robustly defend its ownership until such time as payment is made. If your contractor ally is willing, they can then ‘down tools’ in response to this email in order to avoid infringing on IP you still own.
This may be enough for the client to make payment as the project is effectively stalled. However, you and your colleague may then find that there is potentially little stopping the client from finding someone else to finish the work.
As to your implied desire not to upset a valued client, remember that it should be possible to pursue payment using a professional and respectable agent without such collection action having a detrimental impact on your commercial ties with the client. But from your side, practically speaking, would you really grant further credit to a company you already knew from experience to be poor payers?
Lastly, if push comes to shove and you do need to look at your collection options, then try to find a respected and recommended debt collection agency based in the UK that has a local affiliate in the same country as your debtor. They will place your account for collection with a company versed in the laws and customs of your debtor. Note, we often find a local agent makes an overseas creditors claim that much harder to ignore.
Keep in mind -- reputable agencies usually charge a percentage-based commission that is payable on success, but most will not require you to sign a binding contract or pay any fees in advance. Generally we would advise steering clear of any agency that promises the world in return for an up-front payment, as in our experience these claims never seem to hold water and those paying the fees never get refunds. Good luck!
The expert was Adam Home, collections manager at Safe Collections.