Contractors' Questions: What if my staggered payment 'policy' is ignored?

Contractor’s Question: For my ‘Plan B’ business as an audio engineer, new clients are asked to pay for both recording (stage one) and initial edits (stage two) in advance, to protect my cashflow, before I begin further edits/fine-tuning (stage three), and final draft (stage four).

But with an estate agency client I didn’t get the up front fee, as a quick turnaround was needed. I spent 10 hours on stages one and two; billed for payment, got excuses and now learn I’ll be paid for the early work on their receipt of the final draft -- so stage four. I fear I’ve invested a lot of time for fees that won’t materialise. What do I do? I see sticking to one’s guns isn’t always best.

Expert’s Answer: To start with, it is always good to see a business like yours taking a proactive approach to managing the risk of non-payment. Strategies like asking for a deposit up front or, as in this case, incremental payments as a job progresses limit your exposure to payments not arriving on time or at all. 

This is especially important with a new client when you have no prior history on which to base your trust. If they turn out to be unreliable, you want to be able to cut your losses as soon as possible, before you have racked up many hours of work and therefore many hours of lost revenue.

In this case, we would absolutely urge you to stick to your guns. So insist on payment for the work completed so far, before you supply the final draft. We would always recommend seeking some kind of advance or staggered payment with a new client, as once you deliver the work, you lose all leverage you hold. By you insisting on payment at this stage, the client has to make a decision about whether they want the final draft or not.

Be patient but firm and take the time to explain to your client why you need payment for work completed. If you told them that these were your payment terms from the beginning, remind them that they agreed to the work commencing on this basis and that you expect this agreement to be honoured.

If they dig their heels in and absolutely refuse to pay what you have billed so far, then we would suggest trying to agree a reduced fee to be paid, so this would at least cover your minimum costs. If they subsequently don’t pay the remainder, the worst is you won’t have made a profit, but crucially you won’t have lost anything further either.

The expert was Adam Home of Safe Collections Ltd, which specialises in recovering monies for unpaid freelancers, self-employed consultants and professional contractors.