In my experience, it's quite rare for a client to "do a runner" and not pay for services provided. I've polled a lot of small businesses about this and they share a similar experience with my own: it happens, but it's rare. However, when it does happen, it's obviously frustrating and can even lead to cashflow problems if the client is a big part of your income, and are refusing to pay for the services you've provided. This article will look at ways to try to avoid - or minimise as much as possible - such a scenario.To ask for a deposit or not?
There are pros and cons in asking a client for an upfront deposit before you even carry out your services. The pro is obvious: you secure enough money to cover your costs, while also establishing that the client is serious about requesting the use of your services (they obviously don't want to lose their deposit). The drawback to this is that you may well lose some prospective clients to other service providers that don't ask for a deposit. The client/service provider relationship is a delicate balance between the client wanting to be reassured by your actual work carried out for them, and the service provider being reassured that the client will ultimately pay for the services rendered. Sometimes a small deposit can remove the "tyre kickers" from wasting your time, and most clients will understand and won't mind paying up some kind of nominal deposit to kickstart the project off. Saying that, some service providers use a "no deposit required" policy as a selling point. It's certainly something to experiment with.
Collect as much contact information from the client as you can
This should be obvious as to why this is important. In the worst case scenario, you'll need to be able to have a confirmed name and address of a client if you had to take the legal route. If you only obtained an email address and a name, it MIGHT not be enough (of course, they could make up a name, the email address could be a throwaway address they setup and haven't used other than to contact you). If a client is reluctant to give you contact details that you can confirm, this is a red flag. In my experience, good clients (as in, 99% of clients I deal with) have no problem divulging their contact details. In rare cases, I've hired a tracing company to help find non-payers. I've been able to do that, because I've obtained enough contact details of the non-paying client.
What to do when they are late in payment
First off, don't go off on the deep end. Keep things polite when you communicate with a late payer. A lot of what I would consider good clients pay late from time to time. They might have cashflow issues and waiting for a payment from one of their own clients before paying you, maybe they are preoccupied with a serious personal or business problem, or maybe it's something less serious like their spam filter is filtering your emails and they're not even seeing your reminders. I've always found if I provide a bit of leniency in late payment, my clients very much appreciate it, pay up, and I maintain a good working relationship with them.
However, if you've sent several emails and made a number of phone calls, and they've completely ghosted you, then you might consider bringing a County Court Judgement against the individual. Ultimately, a judgement in your favour would then mean you have a lot more legal options in actually getting the payment back. In most cases, a CCJ made against an individual is enough to scare them into paying back the owed money. However, if they still refuse to (or can't), then you could get the judgement enforced. You can ask for a "warrant of control" that essentially allows you to send the baillifs in on the individual, who can secure items to the cash value of what's owed, plus expenses. Saying all of that, before you even think of issuing a CCJ, do your own research first. In summary
It's my experience to treat prospective clients with a light touch. I prefer to put the burden of trust on my own shoulders and I don't ask for a deposit. However, I do verify their contact details, because I feel uncomfortable doing any work for anyone who is essentially anonymous. That is NOT a good feeling. In almost every case, my clients willingly give verifiable contact details, I do the work, I get paid. Of course, your mileage may vary depending on the service you provide, and how much you are charging. In many industries, deposits are expected, and prospective clients are expecting and willing to pay them. In that sense, it's wise to research the industry you're starting your business up in, and seeing what how other businesses that provide similar services to you operate in regards to protecting themselves. Article kindly provided by uktrace.co.uk