What if your client won't pay?

April 18, 2014

We've all been there before: 30 days pass, then 60 days, then 90 days...or - worse still - your client flat out refuses to pay an invoice. When you, as Account Manager, are the jam-in-the-sandwich between your client and your Finance Department, what do you do?

There will be a reason why your client is not paying, and you will need to use every relational tool in your toolbox to find out why. It's best to start your enquiries as soon as it is obvious that payment is not forthcoming. The sooner you know what the landscape looks like, the sooner you can help to figure out a solution to the situation.

Initial questions

Account Managers are usually not involved in chasing late payments in the early stage of the process. Initial communication with your client will be made via your Finance Department or company accountant. An Account Manager typically gets called when Finance has either (1) been alerted to a deeper problem; or (2) has tried unsuccessfully to extract payment. The exception to this is if you are a freelancer or sole trader, and are both designer AND Account Manager, then the issue is yours to deal with right from the outset.

If you are making the first non-payment contact then the following applies:

  1. Contact your client directly, as soon as the payment is overdue. A phone call or face-to-face meeting is far more effective than email at this stage.
  2. Be polite and reasonable. There may be a simple explanation for the late payment.
  3. Explain that you have not received payment, and ask if there has been a problem with the work that was supplied.
  4. Ask when the payment will be made and agree on a payment date.
  5. If your client needs more information from their end, say that you will call the following day once they have had a chance to investigate.

Depending on the answers to questions #3 to #5, the process may become more complex...

No money

It could be that your client simply does not have the cash-flow to pay you. Rather than being up-front about it, they may be embarrassed and keeping quiet, hoping you will forget about them. Maybe they are waiting for you to be the "squeaky wheel" before they will pay you. 

Establish a payment-plan

Receiving part-payment over time is better than no payment at all. If your client is able to pay off their debt via instalments, make sure you agree to include interest (otherwise you are, effectively, acting as an interest-free bank loan to your client), and make sure you get this agreement in writing.

Work embargo

It is not wise to generate new work for this client until their debts are paid off. Even then, you will need to have a heart-to-heart about paying for work going forward. Taking a % deposit up-front would be one safe-guard you could put in place, and if the project has outwork costs (e.g. print, photography, media, etc), then those costs should be paid up-front in full.

Ring-fence the debt

Your client may have gone through a particularly difficult patch, but they traded through it. Their cash-flow is now good, but they are struggling to pay off their old debt, so you could consider "ring-fencing" that debt. This would enable you to keep trading with your client normally, and your client will agree to pay off the debt over a period of time.


Your client is unhappy

Did the delivery of a project fall short of your client's expectations? Did you make a mistake in production or in the invoice details? Was quality below-par? If your client is unhappy, the situation will usually fall into one of two categories: justified objection and unjustified objection.

Your client is justified

Did you make a mistake in either the invoice details, or the job itself? Did your invoice not match the quote they received? The best solution is to admit the mistake and then figure out what you can do to redress the issue.

It may be as easy as re-issuing a new invoice with the correct total and description; or, it may mean you have to redo the job before your client will agree to pay the invoice. There may even be the odd occasion where you will need to credit all or part of the invoice back to your client and chalk up another "learning experience".

Whatever you need to do, do it quickly and without blame-shifting. Apologise profusely, let your client know what you plan to do, and keep them informed of progress until the matter is rectified.

Your client is unjustified

Firstly, remember to keep your cool. Their objection may have "unfair" written all over it, but - in their mind - they are correct, so you need to tread softly.

Talk to your client to find out why they are unhappy. Their refusal to pay an invoice may be only a small part of a larger issue. Perhaps their expectations didn't align with yours or they may even be blaming you for errors they made themselves. Maybe they have simply made a mistake in their understanding of the invoice.

As you dialogue with your client, omit emotive words from your conversation - these may inflame rather than pacify. Present the provable facts of the project, and you will find that heat starts to evaporate from the situation. It will be difficult for your client to maintain an unfounded opinion when faced with a paper-trail, records of conversations and meeting reports that indicate otherwise.



Sometimes agency and client simply won't see eye-to-eye, and invoices remain unpaid. If dialogue and tolerance hasn't worked, you may have no choice but to turn to debt-collection.

The process:
  1. Send your client a formal letter requesting urgent payment. Ensure this is an actual "letter" (rather than an email), and hand-deliver it if possible (you won't want your letter getting "lost in the post"). The letter should clearly indicate the date of writing, the date you expect payment by, and the date when late fees and interest will start to accrue.
  2. If no response is forthcoming, or if the response is not favourable, send a second letter advising your client that they are in breach of contract (assuming they have signed your terms of trade, or made a verbal agreement with you - which is binding in most countries). State that you will have to enlist the services of a debt-collection agency if payment is not made by a specified date, that they will be liable for all debt-recovery costs, and that you will be withdrawing your services. Remember to keep to the dates set so that your client will know you mean business. 
  3. An alternative to using a debt collection agency is to lodge a claim with the Disputes Tribunal (New Zealand), or through your local court system.
  4. If you have delivered a web-based project (where you are supplying the hosting), it will be tempting to turn off/black-out their site. Think twice before you do this as a move like this is highly antagonistic and may not result in your goal of payment of the debt (and may also put you in breach of contract).
  5. Even if the amount is small, try not to write off debts, as that only encourages your client to do the same thing to another agency (besides which, you definitely won't get your money). 


Preventative Account-Managing

It's extremely difficult to know whether a client is going to be a good or bad debtor. Even clients with whom you have had a long history can fall on hard financial times without you being aware, and every job has the potential to go pear-shaped if you are not careful.

Here are some tips to help mitigate invoicing and payment pitfalls:

  • All work should be quoted before proceeding.
  • Ensure all quotes are approved (in writing) before proceeding (email approval is fine).
  • Complex projects (such as website development) should begin with a comprehensive proposal document containing a detailed description of deliverables and pricing, plus a section for signatures for both parties. 
  • Website development quotes should contain a section on "scope creep", and what your client can expect to pay in that situation. Design quotes should contain a sentence such as: "Includes one set of author's alterations. Alterations above this will be charged on an hourly basis of $140/hr." Both scenarios will help to cover you when a job evolves due to client changes.
  • Keep a 'paper trail' of communication relating to each job. Email is still the best method of tracking the history of a project, and emails may also be admissible in the courts of some countries (should any dispute reach a litigation level).
  • If a brief changes between quoting and invoicing stage, ensure (in writing) that your client understands what is happening and the cost and time implications of the change.
  • Invoice your clients on time. It's good practice to send out the invoice as soon as your project is completed.
  • Have a clearly-defined process and policy for dealing with late payments.
  • If you are going to give your client an extended period of time to pay their account (e.g. 30 days, 20th of the month following, etc), then they will need to sign a credit application form, which includes your terms and conditions of trade.
  • For clients who are not on a credit account arrangement, it is perfectly reasonable to require up to 50% (sometimes more) deposit up-front before any work is begun (with the balance paid upon completion). If your client is concerned with this arrangement, offer a money-back guarantee if they are not completely satisfied with the final delivery. This shouldn't be a problem if the brief is solid and your team is producing good work.
  • For projects spanning multiple months (e.g. website development or a campaign), arrange to invoice the project in stages - either for work completed during each month, or when pre-determined milestones are completed.
  • Ask your client for a purchase order number as soon as the total cost is known. This is a simple safe-guard for you, and an indication that your client is aware of the total price and has given their approval for the amount.
  • If you can, take your client to a contractual level where they sign either an exclusive or non-exclusive "agency contract". This document will clearly define the expectations of both parties, including sections pertaining to quoting, invoicing and payment. This is a signed document and the handbook by which you can conduct your business relationship with your client.

As Dr Phil concisely puts it "we teach people how to treat us". The processes we do or do not have, and the way we react to situations (such as non-payment) will help to mould our client relationships. Let's make sure that we are building strong partnerships, so that when hiccups happen (and they will), the path will be much easier to smooth out.


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