Sometimes it happens –  you do work in good faith and submit your invoice, but the payment never comes.

I’ve talked before about how to protect yourself against this. 

This post is about what your options are if it happens.

I know that what often happens is… NOT MUCH.

Maybe a gentle reminder that the money is due and payable.

Sometimes your customer will refuse to pay and raise some dispute or complaint that they wish to resolve before they’ll pay.

This is not okay!

The terms of payment are clear (they should be). If you don’t have decent terms, get some. I can introduce you to someone if you want.

In no contract is it ever written that it’s okay to withhold payment if you’re unsatisfied with something.

So don’t accept any of that b*llsh*t.

If someone agreed to your terms when they accepted your quote or signed your contract (and you’ve raised your invoice according to those terms) then payment is due when those terms say it is.

And any dispute about the work is a separate matter.

So that’s that part–  if someone doesn’t pay your legitimate invoice, they’re breaching your contract and you should take action.

A mistake is to let it slide which reinforces to them that not paying is reasonable.

And lots of people do let it slide, often for ages, usually because of fear that it will damage the relationship with the customer. 

It’s an understandable fear, it feels like conflict, which nobody wants and that customers have some power. They can stop work if it’s not finished or withhold other work if it’s a repeat customer or trash talk you and damage your reputation.

So the fear is real.

But don’t forget – the person not paying is the ars*h*le, NOT YOU…

(Unless you’re the ars*h*le, I guess)

So what should you do? 

The answer is to enforce what it says in your contract.

There are written consequences of not paying. Do those things.

If the consequence is that you stop work, STOP. Immediately.

If it’s something else, do that.

Communicate in writing that the debt is due and overdue and the consequences will happen if they don’t pay it by a certain date.

Then, if they don’t pay, do the thing.

This process is important because you’re stating that the debt is due, in writing. 

If they respond, a court probably see that as accepting the debt (especially if they acknowledge the debt)  which will be helpful if you go to court.

Then you have options:

Continue to hound them, unless they are ars*h*les and either are genuinely upset with you or scamming to avoid paying, this is quite effective. 

Hounding them (within the law) usually means they’ll pay you rather than someone else — especially if they’re juggling cash, which is usually what it is. 

Hire a debt collection agency to hound them for you. There are main types:

• The chasers
• The lawyers
• The specialist debt-collection lawyers.

The Chasers

They usually charge a fee of 20% of what they recover and they essentially do the hounding for you — to a business or to individuals.

They’ll point out the potential consequences of non-payment and apply pressure.

They recover a lot of money.

But it ends there, usually. If someone just doesn’t pay, they kind of run out of steam.

The Lawyers

 You can then escalate to a legal representative who will send your debtor a legal letter of demand (which means a letter from a lawyer rather than just from you).

You can go straight to the lawyer, there’s no necessity to go to the chases first.

The lawyer can escalate the matter by applying to the court to rule that the debt needs paying and the judgement can be enforced — the court can seize assets or make people sell assets to pay a debt.

(Of course, that only helps if your debtor has assets – if they have nothing, you’ll probably get nothing).

If your debtor is a business the process is similar. You sue the business for the debt and you can have the court issue a wind-up notice. 

Essentially, the court adjudges the business of being unable to pay its debts (because it hasn’t, despite all the asking) so it must be insolvent and therefore has to be wound up and its assets sold to cover its debts.

If they’re broke, with no assets, you’ll get nothing so it’s worth checking, if you can (because this process costs money).

This is a real threat, though, if their business is not about to die – assuming they’d rather not get wound up, it usually prompts people to pay.

Specialist Construction Lawyers

If you’re a construction subcontractor there’s a special law for you called the Security of Payments Act. 

It’s a process to resolve payment disputes between you and your client without going to court and it’s very effective at recovering money for subcontractors without going to court.

It’s complex and you should use a proper lawyer.

And it has time limits, so get onto it sooner.

So, don’t leave your debts uncollected, get your money. 

If you have a lawyer or a debt collector relationship get onto them early and if you don’t and you have a debt or two get onto us and we’ll give you the details of some we’ve come across.

Email ‘DEBT’ to support@smallfish.com.au  and I’ll send you the contract details.