by alexliu518 on 7/12/24, 7:18 AM with 142 comments
I'm a freelancer working on various software development projects through different platforms. Recently, I completed a significant project for a client outside of these platforms, and they're now refusing to pay the final invoice. Despite having a clear written agreement and delivering everything as agreed, they're ignoring my emails and calls.
Has anyone here faced a similar situation? How did you handle it? Any advice on legal actions, or ways to secure payment upfront in future projects? Appreciate any tips or resources that could help!
Thanks in advance!
by tinco on 7/12/24, 9:29 AM
After you had your lawyer send them an angry letter (twice) and you haven't got your money after two months, you need to emotionally accept that the money is likely gone, and make sure that you are mentally capable of focusing on ensuring your financial stability.
Either set an automated mail to remind them what they owe if it's a small amount of money (i.e. less than 5k) and if it's more ask your lawyer if they or someone they know can handle the case on a fixed price basis.
And then move on. Non paying clients absolutely suck. I haven't had one that didn't pay at all (though some very late payers), but I've had friends tell stories and it can wreck your freelance experience. If you let them get to you then you'll lose the feeling of freedom and all advantages of freelancing. Accept that it's part of the game and account for it in your financial planning. If you don't the stress will eventually kill all enjoyment of being a freelancer.
(Btw, I don't mean give up. Just dissociate from the outcome. If the only fee your lawyer would take is 100%, still do it to f with the lousy client.)
by atlantic on 7/12/24, 10:47 AM
After struggling with the problem for a few weeks, I located a debt-collection company, and decided to offer the debt to them, and all related documentation, so they could collect it for themselves. I then informed the client of my intentions via email. I said: I'm never going to see this money, but neither are you.
They got back to me within a couple of hours, and paid before the end of the week.
by ClearAndPresent on 7/12/24, 9:46 AM
For this project:
Did they refuse to pay actively ("We won't pay you."), or passively (No replies to emails.) The latter might be incompetence.
As others mentioned, specific legal advice depends on respective jurisdictions, but an offical lawyer's letter sometimes wakes up legal when accounting is drifting.
Did you deliver the final access to the code / server / credentials? If not, gently bring servers, DBs, platforms to a halt pending final payments.
Future projects:
Contract, always.
Up-front commencement payments, always.
Price yourself higher in the initial quote, and ask for staged payments, such that by the time your delivery schedule is 50-75% done you are 100% paid.
You control the source code accounts, you control the server credentials, you control the database access credentials, you hand over final access after the final check has cleared.
by issa on 7/12/24, 3:19 PM
- small claims court is very easy and relatively quick. no need for a lawyer.
- there is a cap on the amount, so I won $10k, not the full amount owed. But close enough and much better than $0.
- make every reasonable attempt to resolve this prior to filing but, as stated throughout this thread, do not stress yourself out. This should be a fire-and-forget process. Consider the money lost, and if you win, it's just bonus.
by codazoda on 7/12/24, 3:26 PM
YMMV!
You could probably turn it over to a professional collection company as well.
by caseysoftware on 7/12/24, 4:13 PM
Second, understand where the code/system currently is. If it's on your server (defined as a server you own or rent), you have different options than if it's on their server.
If it's your server - unless you have a commitment to continue providing the service - you may be able to shut it off immediately.
If they have granted you access to their server for the "duration of the project", you may be able to make the argument that the project isn't over yet and do things.. but speak to an attorney.
Either way, if this is a mission critical app for them, disrupting their business can cause other difficulties for you that you don't want.
Collect the information you have - agreements, records of payments, commitments (written are best, verbal are usually worthless), and ownership - and speak to an attorney. In the US, many lawyers will speak with you for 30 minutes for free as they evaluate your case and lay out options.
by hristov on 7/12/24, 9:16 AM
I have not worked as a freelance programmer nor hired any, but a friend really likes to hire freelancers for various projects and often asks me for advice and tells me about his travails. I think practically speaking, it is not that hard for a freelancer to get paid because software always needs upkeep for bugfixes or updates to work with other software or to add new features. And it is far far far more expensive to have a second freelancer look at the first freelancers code and do the updates.
Some people say it takes more time to read code than to write it. I am not sure if that is true but very often if you ask a second freelancer to do minor updates on another freelancers code, the second guy will just say that the code is so awful the whole thing has to be rewritten from scratch. So you have a big advantage just by having written the stuff and having the code in your head and written in your style. You are the best man to fix it and update it by far.
My friend always pays his bills but he is a very tough negotiator, and often gets comparatively good bargains for freelance work. However, all the benefits of his bargains disappear when he needs the software to be changed a bit in six months or so. Then the freelancer is in the drivers seat and my friend completely drops his tough negotiator stance and becomes super nice and friendly towards the freelancer.
So if you do not want to pay for lawyers and small claims court is not suitable for some reason, you may just send a demand letter saying that you are charging a 20% penalty for non-payment and interest will accrue in the future, and just wait for your client to need some update and then you demand that all previous invoices be satisfied before discussion for new work even begins.
IANAL, this is not legal advice. If the sum is a large amount, it would probably be best to consult a lawyer.
by adriand on 7/12/24, 3:39 PM
More generally, this kind of situation demonstrates that these platforms do in fact provide value to the parties involved. So if you're a freelancer and you're considering working directly with clients, be aware of the risk of non-payment.
by duckmysick on 7/12/24, 9:42 AM
Ideally you want a non-recourse factoring agreement (the one where the factoring company takes most of the risk of non-payment), but it might be difficult to get. It helps if you can show that your previous clients paid on time. But then again the freelancing platforms handled that for you.
In any case, it's worth asking around. Have your lawyer review the factoring terms before you agree to anything.
by kevinsync on 7/12/24, 4:56 PM
My clientele is found mostly word of mouth, people I actually know (or have worked with in the past in a W2/corporate environment). I find the most success working with digital agencies and small businesses because they both have strong incentives to pay well (and pay on time).
I treat the work I do as service, rather than something more impersonal (strict deliverables, generic staff augmentation, etc) -- at the end of the day, my role is to help them solve real, immediate problems for their business by being patient, present, cheerful and competent help.
In the unlikely event of a client relationship souring, I just let it go. Chalk it up to the game, use it as fuel for bigger and better things, whatever. I guess I can only do that because I keep everything piecemeal, bite-sized, running in tandem to each other, and have many pans in the fire at any given time.
Anyways, apologies for the tangential rant -- other commenters have offered very effective and actionable advice for your particular situation. I figured I'd just chime in on how I've managed to avoid the situation most of the time.
by sjducb on 7/12/24, 3:40 PM
I’ve quietly released license enforcement into a client’s system before. They paid up very quickly.
“Your licence has expired. Please contact xxxx for a new license”
by papaver on 7/12/24, 3:16 PM
i was screwed out of over 6 months of pay north of $50k. i wasn't keep tabs on the payments and i wasn't keeping detailed records of my work. both things i no longer let slide in any way. i spoke to many people and lawyers, but decided to move on and let it go.
in the end how much money and time and energy do you want to spend on another lousy human being or entity? it only hurts you emotionally and takes up valuable time to focus on more productive things. ten years later it's a blip in my life that forced me to learn and be better about picking clients and billing, etc. don't let the 10% ruin your work with the other 90%.
by escanda on 7/12/24, 8:42 AM
For instance, I am in Spain and I always signed contracts based in California, etc. Badly done! Next time I will set Madrid, Spain courts as ruling law.
This way you can sue the ass off them and make them pay the money in debt and even some more to the courts.
edit: typo
by CPLX on 7/12/24, 3:14 PM
But if you want the real answer, like what actually works, then try to shame them in public or to people they care about.
Like if the CEO posts on LinkedIn, post underneath saying "How do you reconcile this with not paying your freelancers?"
Send an email with every single person at the company you have an email address for, ideally including the top people, copied, and ask them the same question, while asking if this is a common problem at the company, like are you guys all getting your paychecks on time, or is this just something you do with freelancers.
If your client has case studies or a list of their client's logos on their website take a guess at who their contact would be at that client and reach out to them via email, copying your contact at the offending company as well, asking them if they've had any issues with financial misconduct at the offending company during their engagement with them, because you have.
Clearly there are pros and cons to this approach, and your own reputation to think about, as well as fully burning the relationship and so on.
But assuming you're OK with all that, this tactic, unlike the others suggested, is completely free and exremely fucking effective.
by karaterobot on 7/12/24, 4:04 PM
First off, if possible, you want to stage your contract with multiple deliverable milestones, each associated with them giving you money. When they pay you, you move on to the next stage. It's more upfront work, and more oversight, and just generally more complicated than "I work for a couple of months and then throw the whole thing over the fence, and you throw me a bag of money from the other side". But, the upside for you is less risk and a steadier source of income.
For the client, it builds in more opportunities for feedback, including the opportunity to say "I don't want to work with this guy anymore," or "actually, I'm running out of money and I want to pump the breaks", so it reduces their risk as well.
I never took anyone to court; I guess I got lucky.
I recognize none of this has answered your question. The only real advice I have is that there's got to be a reason they are refusing to pay. If they don't have the money, unfortunately you are probably never going to get paid, even if you take them to court. If they do have money, and are just unsatisfied about something (not necessarily your fault, it's often just a misunderstanding) then I would do everything in my power to figure out what is wrong and fix it. Word-of-mouth referrals are so important to contracting, and often just being really high-touch and communicative with the client—and yeah, occasionally giving them a few hours of free work to indulge their petty whims—can turn an angry client into a happy, paying customer.
by macmac on 7/12/24, 7:39 AM
by politelemon on 7/12/24, 4:00 PM
by TylerE on 7/12/24, 8:46 AM
by oakesm9 on 7/12/24, 8:50 AM
If they have the money to pay, but are ignoring you then escalate from your contact at the company to someone higher in the chain. If that doesn’t work and it’s a relatively small amount of money then you can try to enforce the contact.
I’m in the UK and there’s a small claims court for specifically this. I’ve not gone through it myself but from those that have it’s simple enough to do yourself without paying a lawyer, but it’s time consuming. Im not sure where you are but look into if there’s in in your jurisdiction.
If the client likely doesn’t have the money to pay, then it’s likely a waste of time to pursue it. I had this happen recently when a client went under and ended up just writing it off as a loss. Luckily it was only my time that was wasted so not the end of the world.
by twobitshifter on 7/12/24, 4:42 PM
One good rule is to never work for lawyers. Another is to stop work at the first sign of a delay in payment. Lastly, at the very least leave something critical unfinished until paid everything back due.
by qprofyeh on 7/12/24, 8:36 AM
by satisfice on 7/12/24, 10:20 AM
I guess it depends on how big the client is— bigger clients are easier to pin down… and it also depends on how much they owe you (in my case, it was $25,000)… but my general suggestion is: walk away. Warn your community not to work with them. Be smarter next time.
Smarter how? Well, you could have withheld the final product until you got paid. This is really the only leverage an independent has.
by JohnMakin on 7/12/24, 4:47 PM
I used an API key that was scoped to precisely me and my personal email account. They liked my POC, but kept getting sketchy on negotiation/payment, so I quit the project.
Several months later I was getting usage alerts from my API token sent to my personal email. Turned out they were using what I had written (wasn't surprised). I simply disabled the key, and the way it was set up I very much doubt they were able to fix it on their own.
The lesson I learned is to never trust a client and that lesson has served me well since. If there is any amount of money you are uncomfortable lighting on fire if still unpaid, insist on being paid up front.
by kerkeslager on 7/12/24, 4:14 PM
With new clients, they pay half up front or we don't start. I've refunded part of this amount a handful of times if some part of the process doesn't work out for whatever reason, so I don't spend or invest the money until the project is done.
It's not just that you're losing less money if the client decides not to pay. It's also that your clients are more likely to pay: a client who is willing to pay up front isn't stingy with money. These clients are better in a lot of other ways, too.
I think in 5 years of doing this, I've been turned down by 2 clients because of this. I freelanced a year before I started having this policy, I was turned down by 1 client after giving an estimate.
Repeat clients, I don't make them pay up front. I might reconsider that if a client was significantly late on a payment, but so far that hasn't been a problem, possibly because the up-front pay half filters out clients likely to pay significantly late. I say "significantly" because I've on occasion waited as much as 2 weeks for payments, but in those cases I believe it was due to disorganization rather than any malicious intent.
EDIT: One thing that I think makes clients willing to pay half up front is that typically I try to break the project into as small of chunks as possible, with a truly minimal viable product being released up front. The first contract is for the first chunk, and the half up front is for that chunk. This results in a smaller initial payment, as a lot of my initial contracts are in the range of $4000-$8000.
This also incentivizes them to agree to breaking up projects--some clients want to sign one big contract for a $250k two year project, but balk at paying half of that up front--and when the project finishes faster and for far less than they initially wanted to sign for, I gently remind them how much money I saved them.
Additionally, a lot of the value I bring to the table is this sort of process improvement. I've been in contact with a few clients a few years after we worked together, and found out that they were still doing the small-releases process I brought in. I'm not going to call it agile because a lot of these companies were doing "Agile" before--that word basically doesn't mean anything any more, unless you're really clear about defining it as defined by the Agile Manifesto.
by xtiansimon on 7/12/24, 12:09 PM
Let me explain. I don’t know much experience you have with how your customers valuing your work product. Under some circumstances you may have maxed out the value of your work. If you want to keep working with them, or within the community that you share with them, again, you may want to let it go. There’s a lot of moralistic reasons why you may have reached some kind of limit. And from personal experience I know it’s next to impossible to appreciate them at this moment.
But if they were impossible, and you overdelivered, solved the problem with grace and generosity—and still believe you are owed your final invoice…nothing short of legal intervention will jump start a non-paying client.
That said, I saw this little nothing viddy on instagram. It’s a funny FU
by aas1957 on 7/13/24, 4:22 PM
In the future for domestic transactions, just add a little clause like "If valid payment is not made by due date, provider can send client a 3 day notice to cure. if the balance is not paid, Client stipulates to default judgement for the purpose of collections."
Now I'm sure that is not legally phrased correctly, but someone could make it a better. Idea is, Client, if they have not disputed invoice and not paid, admit to a default and you are immediately off to a judgement and collection.
Screening clients is tough. And sooner or later, this happens.
Oh, one guy I know always inserted code in his work so that he could turn his code off is someone did not pay. And then showed a screen with a payment message. Nice.
by jfrbfbreudh on 7/12/24, 4:21 PM
by mkbkn on 7/14/24, 9:59 AM
2 months ago I faced an almost same issue. Best is to forget it.
Build your positioning such that you command higher prices, better clients & take 50% deposit minimum before starting the work.
Look into Jonathan Stark.
Another thing is to name & shame them. Just state the facts on social media.
Maintain a blacklist of clients & share them woth your fellow freelancers.
I'm into marketing & maintain such a list. About 7-8 people/agencies in there. Not everyone in there didn't pay. Someone was a micro-manager, someone was scope creep, someone demanded unnecessary things during interview process, wasted a lot of my time etc.
by hello_computer on 7/12/24, 3:46 PM
by ultim8k on 7/12/24, 3:11 PM
by sam_bristow on 7/12/24, 9:26 AM
Fuck you, pay me (2012).
by gpetr on 7/12/24, 9:29 AM
If you still have no answer, expose them! Write a blog or an article about their malpractice. Publish the code you wrote for them if you can. Perhaps, that will draw their attention.
Put an equal amount of effort in proportion to the amount of money you're owned. If your effort becomes too great, drop it and spend your time elsewhere.
by hazmazlaz on 7/12/24, 12:27 PM
by throwaway4good on 7/12/24, 7:34 AM
In general breakdown payment for larger projects into smaller installments / subprojects.
by dvh on 7/12/24, 8:40 AM
by banish-m4 on 7/13/24, 1:32 AM
by HumblyTossed on 7/12/24, 4:01 PM
by alexdowad on 7/12/24, 4:19 PM
by jokethrowaway on 7/12/24, 10:59 AM
Back to your money: You likely lost it. If they have assets you can threaten them with legal means but I'm experience it never worked.
Going to the legal system without a lawyer just made me waste 500£ and I didn't recoup anything. It would have been money better spent if I paid a hacker to steal his crypto
I had some kind of opposite situation once, a client decided to implement a non scalable shortcut instead of solving the issue in the proper way - then called me after 2 years asking me to fix it or to pay him back his money (something like 2k£). He threatened legal action, I knew the court case would cost him more than that and I just explained the unfairness of the situation and then ignored him.
by rinka_singh on 7/13/24, 12:49 PM
Would that work?
by throw_that_away on 7/12/24, 4:11 PM
by trinsic2 on 7/12/24, 7:56 PM
by beardyw on 7/12/24, 8:25 AM
by Zealotux on 7/12/24, 10:21 AM
As a freelancer, it's sometimes hard to get around the simple idea that you are your own company and that you must act like one: protect and defend your work at all cost. It took me months of time wasted, and thousands of dollars of work stolen to accept the fact I need to change my behaviour, as a freelancer you have roughly two approaches:
- set boundaries early on, don't start any work with a predefined and agreed upon down payment, if the work is more than a few days long: set milestones as need be with payments required.
- lawyer up, be flexible with clients (delays in payments are a common occurrence with any company) but don't be afraid to go after dishonest clients, if you can't afford it or don't feel like going this path then you need to set up as many contingencies as possible upfront (see previous point).
A classic video that might help you get in the right mindset: https://youtu.be/jVkLVRt6c1U
by ajb on 7/12/24, 11:18 AM
1) We're solvent, and promised you two week terms - but our accounting dept doesn't work like that.
In this case, whoever signed the contract should have flagged that they can't execute two-week terms. But sometimes their eyes have glazed over before they get to that bit of the contract - or they don't know how their accounting dept works (often with a monthly payment run). In this case, the contractor is likely to eventually be paid. But getting paid on the actual terms would only happen if you have enough leverage to get an executive to force the accounting dept to make an exception, and do it every single time.
2) We're solvent but have a cash flow problem.
Here, a company will push back payments until its cash flow problem is resolved. But that could be months, or even longer. They will make the most critical payments each months - for things that they rely on going forward, like their cloud provider, DNS etc. At this point the engineering team will learn (if they didn't already) to make sure they get notifications of non-payment for critical services, rather than relying on accounting to be able to triage them. Your payment depends on having some kind of leverage - providing a critical service is best, but being the squeaky wheel can also work, as there may be some cash left after the critical ones. Being paid consistently, but always late, is another sign - this means the accounting dept has a hole, but it's of fixed size and they've 'solved' it by taking a float from all their creditors. In this case, you are likely to be paid - eventually.
3) We are about to go bust. This looks rather like 2, except that you won't get consistently paid even late, and their other contractors are also likely to not be being paid. If the company is gambling for resurrection, they may even be more engaging on the actual work side, if they think your work is part of what will save their bacon. Legally, incurring debts if you know that you're insolvent is fraud (at least in the UK). But, that hard to prove and only applies if there isn't some chance of not going bust. I suspect that if there's a big chance of going bust, there's actually a propensity to spend more on contractors - since the chances are that they won't need to pay. Sometimes a company structures itself so that it can make a subsidiary insolvent but keep going. This might be identifiable from filings, but I'm not an accountant so I can't advise how. Although, I'm not going to work again for a company where the CEO has made himself a creditor secured against the company IP....
Others that I don't have any insight into, perhaps others can comment:
4) We are a big company and can get away with X month terms regardless of the contract
5) Shenanigans are our way of doing business. We think of it as "playing hardball".
by AlexDragusin on 7/12/24, 9:37 AM
by alexliu518 on 7/13/24, 6:40 AM
by coding123 on 7/12/24, 4:10 PM
by jimnotgym on 7/12/24, 4:01 PM
by qarl on 7/13/24, 4:13 PM
Going forward, remember to structure your work so that you minimize your exposure to this risk: get paid upfront, don't let the unpaid balance get too large, etc.
And try not to let it get under your skin. It's not you - it's them. And they are horrible.
by pxue on 7/12/24, 5:03 PM
otherwise, consider it lost + name and shame
by Connector2542 on 7/12/24, 4:51 PM