When IT contractor clients don’t pay - a step-by-step guide

Signed, savvy and submitted

As an IT contractor, you have signed a lucrative contract with a household name; you’re excited by the opportunity and looking forward to the rewards. There’s piece of mind too, because you ran the necessary due diligence checks, writes Sid Home, managing director of Safe Collections.

You even invested in an online credit report from a reputable agency to determine that this established IT player appears to be solvent and a prompt payer. The cherry on top is that your first invoice has just been sent off and you are due payment in 7, 14 or 30 days.

Then what NOT to do, by a CUK reader

So the hard work done, you and your business can now merely sit back and expect payment to be administered promptly and in full. Right? Over to the CUK reader who clearly, but wrongly, thought so. “[That so-called] household name IT company...is now three weeks late paying my first invoice.

“[Since the due date]…I have been jerked around by their accounts payable department [who initially claimed I needed to make] changes to the information in the invoice, although everything on the invoice is as per the contract.

“I have spent much of the last three weeks trying to sort this out, and it appears that several other contractors are in the same boat. It looks like poor admin to me rather than anything iffy, but it's really winding me up.”

Proving that even the experienced are not immune, the reader added: “I have been contracting for four years and have never been paid late like this. I still can't get confirmation that the admin is fixed [or of] when I'm getting paid.”

Alarm bells typically ring too late

As was probably the case for this IT contractor, the first indication that something is amiss is when the payment fails to arrive. In other words, by the very first evening after the due date alarms bell start to ring if no money has been received. But by that time, it’s actually already too late - if maximising the chance of getting paid fast and fully is the goal. The following steps make this clear and, listed in order of when you should take them, offer ALL IT contractors a tried and tested blueprint for getting paid what they’re owed, whether the hold- up is due to ‘poor admin’, something ‘iffy’ or much worse.  

Step 1: About one week after issuing the invoice and prior to the expected payment date, make contact with the client by telephone or email. Confirm the invoice has been received and that there are no issues with the services provided thus far.

Step 2: On the due date, ensure you send a statement if no funds have been received.  Remember a statement is just that a statement of the account, it is not a request for payment.

Step 3: At seven days overdue, send a reminder letter or email to the client requesting payment.  (See the upcoming Part 2 of this guide – ‘Letter A’, for the suggested text of the letter/email)

Step 4: Between seven and fourteen days overdue, a telephone call should be placed to accounts payable to query why no payment has yet been received. Make a note of any promise of payment and the person who promised it.

Step 5: At fourteen days overdue, a second stronger letter requesting payment and warning of further late payment charges should be sent to the client. (‘Letter B’ – to feature in Part 2)

Step 6: Between day fifteen and day thirty, you should make regular contact with the client by telephone to ascertain the reason for the delay. If you have provision for cessation of work due to non payment this must be illustrated to the client.

Step 7: Keep notes of any calls or emails sent to or received from the client regarding payment. This will aid your company should a promised payment not arrive as you will have the record of the broken promise.

Step 8: If no payment is received by day thirty you and your company MUST carefully weigh up the risks involved in continuing to supply services that have yet to be paid for.  Can your business survive should the next invoice be unpaid?

Dealing with agents – contracts of engagement 

Of course as a contractor or freelancer you may well find yourself engaged through an agency, whereas the above guidance is primarily for contractors who are direct-to-client. If your engagement is covered by a legal contract, and invariably it will be, this will often include numerous clauses that can impact on the speed and regularity with which you receive payment. 


Does you contract state that your timesheet has to be emailed or faxed to a specific address or number?  Do they have to be submitted by a certain time or signed by a specific person? You ignore these instructions at your peril! You will be dependent on the individual that processes payments so it is in your interest not get on their bad side.  Paperwork that is late, incomplete or otherwise irregular creates more work for the processor and increases the likelihood you will not be paid on time.


As with timesheets, many contracts include clauses relating to the submission of invoicesFollow them to the letter and submit your invoices in a timely fashion. This may seem to be impossible to overlook but it can and does happen. After all, how can you expect to be paid if you have yet to submit the invoice?

Payment Terms

Many contracts will stipulate the agency’s payment terms, these must be carefully scrutinised.  If you generally expect payment after 14 days does their contract stipulate 30 days?  If so you will need to ensure you have credit available to cover your expenses for a further 16 days - as a minimum.

Pay close attention to any clause linking your payment to payment being received from the ultimate end-user/client. Although relatively rare, these clauses can seriously impede recovery in the event of non-payment.

Contractors should always pay close attention to these clauses as they will need to comply with any specific terms contained within. Failure to adhere to these clauses is likely to delay payment (at best).

Contractors without a contract

But what if you do not have a contract with your client? In that case you need to rely on your own terms and conditions of sale.

As an IT consultant, freelancer or supplier, if you have no contract with your client it is imperative that your business has its own terms and conditions of business drawn up - ideally by a reputable solicitor and preferably by one with experience in your chosen field. These must always be signed and accepted prior to commencing work for the client and retained on file.

Your own Ts & Cs

These terms will govern the business relationship you have with your client and should cover all eventualities. These conditions should at the very least contain clauses relating to the following:

·      Charging

- What is the standard fee for the service?

- Does your company invoice incrementally, if so at what intervals?

·      Payment

- What are your payment terms?

- How does your company accept payment?

·      Queries & Disputes

- What is the policy regarding disputes/queries?

- How can queries/disputes be raised?

- What is the time limit on raising and responding to a query/dispute?

The document may also contain other industry specific clauses depending on your chosen field.  Including those relating to intellectual property and copyright, transfer of rights and limitations on use or resale.

Remember - the document is for the benefit of all parties, always insist on having signed proof of its acceptance. Merely stating your terms on your website or on the reverse of the invoice is not good enough.  If you have issues with the client, a signed acceptance of your terms & conditions will be needed.  Similarly should any legal dispute arise these terms may well limit the scope of any potential claim against you and your business.

And finally…

It is important to note that this guidance, including the 8-step timeline, is provided from the point of view of a credit controller and not that of a legal expert, and should be treated as such. But it’s as result that I can confidently say, ‘There is no black art to getting paid; you need only follow a few simple steps.’

Yet the disbelievers need not fear. Part 2 of this guidance series will provide sample overdue letters/late payment letter templates; Part 3 will reveal the tell-tale signs that your client or agent may be in financial trouble and Part 4 will advise out-of-pocket contractors of their options when ‘all else fails.’

Wednesday 6th Jul 2011