If you’re offering services to clients, you have the choice of whether to request payment up front, allow them to pay after delivery or set up a payment plan. Many business owners shy away from asking for up-front payment, fearing it will make them less attractive to prospects. However, this can lead to situations of having to pursue the client through the courts for unpaid invoices — or even having to write the money off completely.
I’ve been involved this year in a case just like this, which illustrates just why it’s always best to ask for payment up front.
My client, a training company, made an Agreement with a customer I’ll call Bob (not his real name) and provided services, having agreed to receiving paying by means of a payment plan. However, Bob defaulted on a number of payments, and I helped the client to get a CCJ (County Court Judgement) for £3,320.04.
It subsequently emerged that Bob had previously attempted suicide and been admitted to a psychiatric hospital, where he’d been diagnosed with bipolar disorder. However, he’d been discharged, with his doctor considering that the risk was low as long as Bob continued taking his medication. It was more than five months after this that he’d made the Agreement with my client.
The response to my first letter to Bob, requesting payment of the CCJ, was a letter from a woman I’ll call Susan, who informed me that she was acting on Bob’s behalf, as his condition made him unable to manage the situation himself. When I tried to establish on what basis she was acting, it seemed that she wasn’t a professional of any kind and appeared not to have any formal authority.
Susan informed me that they were applying to have the CCJ set aside on the grounds of Bob’s mental health issues, which seemed to contradict the information we had that his condition was now stable. This application was rejected but, when I wrote to Bob requesting payment again, I was informed by Susan that another application had been made, since, she claimed, the rejection had been due to a minor misunderstanding.
It had become clear by this point that, even if the CCJ were upheld, there seemed little chance of collecting the debt. Bob’s only asset was a 50% share of a property with his ex-partner, from whom he was getting divorced, and it seemed unlikely that this could be liquidated. The partner had made an offer to pay one of the outstanding invoices, for £650 + VAT, and this seemed the best chance for my client to get any of the money they were owed.
It had seemed reasonable to my client to accept a payment plan with Bob, but it became clear that this had put them in a position where they’d have to write off the majority of the money due to them. My advice would be that, unless you have a very secure relationship with a client, you should always request payment up front. If you do end up owed money, on the other hand, give me a call to find out how I can help you.