Even if you’re not an employee, you have the right to fair compensation. Before you start work as an independent contractor, make a contract that outlines the project you’re doing, how much the client will pay you, and when you expect those payments. You should also state that you will charge late fees for any unpaid invoices.
If you have to go to court, this contract will protect your best interests. For larger projects, however, a contract may not be enough. When this is the case, you may ask for a percentage of your payment upfront – some independent contractors collect payments at each stage of a project. This way, if a client is ever late on a payment, you can pause the project until payments come through. If a client declines to pay upfront, you may choose not to work with them at all.
But what if you’ve completed your work and still haven’t received payment? When it comes to unpaid invoices, you have a few options:
Charge Late Fees
While a late fee may not be appropriate right away, you have every right to charge a late fee after 10 to 15 days of nonpayment. Before issuing a late fee, send a reminder email, as this may encourage your client to pay sooner rather than later. If they still don’t pay after your reminder, add late fees every 10 to 15 days or according to the policy you established in writing – in your contract, on your invoice, or even in your reminder email.
Factoring is a service in which you sell your invoices to a company in exchange for upfront payment. The company will usually offer you a percentage of what the invoice is worth. This is a great option if your payment is severely overdue and you do not expect your client to pay it.
Some factoring services will give you up to 75% of your original invoice, but watch out for transaction fees and other hidden deductions. Although losing some of your income is a bummer, factoring can get you the money you need fast – and without having to chase down late payments or go to court.
Take Legal Action
Many independent contractors hesitate to take legal action because of the cost. Nevertheless, taking legal action doesn’t necessarily mean going to court. Sometimes, the threat of a lawsuit is enough to make your client pay you. Some business lawyers offer reasonable rates to send letters about unpaid invoices.
If your case does go to trial, the court can enforce payments, and the person or company that failed to pay your invoice may even be responsible for your legal fees.
Going to small claims court also lets your client know that they cannot take advantage of you or other independent contractors. Funny enough, the justice system does provide just that.
Call us at (901) 209-5500 or contact us online to make our case your cause.