What to Do If Your Client Doesn't Pay

  By Liz Steblay, PICA Chief Advocate

It was bound to happen. After 15 years and hundreds of contracts, I finally had a client that didn't pay, and didn't pay, and didn't pay. For six months there was one lame update after another. "We're working on it," or "We've switched to a new process." Yesterday, my bank finally received the wire transfer. Here's my story, what I learned along the way, and steps you can take if you find yourself in the same situation.

The Situation

A former colleague now works for a global IT solutions company. His colleague needed an HR expert to help with the final oral presentation to win a big piece of business. I knew just the person - a former "Big 4" consultant who had experience implementing HR systems. We had to move fast though, with the oral presentation just three weeks away. Could the consultant fly to Texas to work with the presentation team the next week? I said yes, and we could work on finalizing the contract at the same time. (Big mistake!)

The oral presentations went well. The IT solutions firm won the work. We submitted an invoice for the consultant's time and travel expenses on May 16. More than four months later (over 120 days) we still hadn’t been paid.

The Steps I Took to Finally Get Paid

I did three things to escalate the issue and finally collect.

First Notice: TIME IS UP

After three months of emails and phone calls, I sent this email:

Subject: RE: Paying Jane Doe - TIME IS UP
Importance: High

Hi Susan,
It's been nearly 3 months since Jane Doe helped your firm win the [client name] work.
It’s been over 60 days since we sent you an invoice for that work.
We can’t pay Jane until you pay us, so Jane still has not been paid for helping you.
Please tell us when we can expect payment, so we can tell Jane when she can expect to
be paid.
-- Liz
PS: Invoice attached again here for easy reference.

By this point I'm sending everything with delivery confirmation and read receipts. More lame excuses. Another month goes by.


After 90 days without payment it was clear that the check wasn't in the mail. The next step was to assemble and send a demand letter. This is the best way to officially escalate a late payment before you take it to court. It’s not difficult, just time consuming. I searched the internet for a sample demand letter then adapted it to my situation.

A demand letter should include a brief summary of the situation, including when the work was performed, when you first billed for the work, the number of days payment is overdue, and the terms of your arrangement. This last part is key: what work did you agree to do, over what dates, when the work was completed, and the pay rate that was agreed upon before the work began.

Attach the contract, if you have one, or copies of the emails that provide evidence for everything you state in the demand letter. LegalZoom has some good do’s and don’ts for writing a demand letter here. They also have customizable forms in their library; search on Late Payment Collection Letters.

Include a deadline: "Should payment not be received by [insert date], we intend to pursue legal action for collection." Also provide the name, phone, and email address for who to contact for direct deposit or wire transfer information if the client doesn’t have it already.

Last, have an attorney co-sign the letter. Important note: any attorney can sign a demand letter. They don't have to specialize in employment issues. Your cousin the divorce lawyer can do it, so can a first-year associate. The point is to show that you’re serious about getting paid. You’ve done all the work to write and assemble the demand letter, so this is a fairly small favor to ask.

I sent my demand letter and documentation via email, return receipt requested, with a to-the-point message:

Subject: Collection letter attached; payment needed by August 24, 2018
Importance: High

The invoice for Jane Doe’ work on [client name] proposal is now 60 days past due.
Attached is a collection letter cosigned by my attorney.
Please remit payment by next Friday, August 24, so we can avoid legal action.
-- Liz

I've heard that most of the time a formal demand letter will do the trick and get the money flowing. Not so in our case.


Nothing greases the wheels of commerce like the threat of a lawsuit. This was how I finally got paid. To make it a legitimate threat, I sent a PDF of the unsigned lawsuit and said if payment wasn’t received within two weeks, I was going to file the lawsuit. Oh, and I sent a hard copy to the company’s general counsel.

Subject: Final request for payment; summons and complaint
Importance: High
To: Susan [the client]
cc: [the technology company's general counsel]

The attached invoice is over 120 days past due, despite your repeated emails that you
“are working on it.” If we do not receive payment by October 22 (two weeks from today),
we will proceed with filing the attached lawsuit on October 23. If you have
questions about remitting payment, please contact our controller, Xxxxx Xxxxx,
at Xxxxx@prokoconsulting.com.
-- Liz
cc: John Doe, General Counsel of XXX IT Solutions
Xxxxxx Xxxxxx, Controller of ProKo Consulting

The money was in the bank ten days later.

How You Can Do This Without Hiring an Attorney

First, figure out which forms to use for the lawsuit paperwork. This usually depends on which court you'll use if you don’t receive payment - small claims court or the regular court.

Each state has a dollar limit for small claims court. (See a list of state court limits here. Tennessee has the highest at $25,000.) If you're just over the limit, it will be faster and easier to file in small claims court. It's also cheaper. For example, in California it costs $75 for small claims but $435 to file in superior court. The National Center for State Courts has links to small claims references and guides for every state.

Fill out the form(s) (see my sample for basic help) but do not sign it. You can fill it out on your own as the plaintiff without an attorney. If your friend/relative that cosigned the demand letter is willing to help, use their name and contact info instead of your own. Again, if you do all the work, they'll probably be willing to let you use their info.

Send a PDF of the unsigned forms to your client and copy the company’s general counsel if you can find the name and guess at the email. In my case the copy to the general counsel bounced back as undelivered, so I sent a hard copy by priority mail to the firm’s main office. (I simply printed out the email and highlighted his name, then attached it to the legal summons and complaint.)

Here’s what I wrote in the email, sent with delivery confirmation and return receipt requested:

Subject: Final request for payment; summons and complaint
Importance: High

Hello Susan,
The attached invoice is over 120 days past due, despite your repeated emails that you
“are working on it.” If we do not receive payment by October 22 (two weeks from today),
we will proceed with filing the attached lawsuit on October 23. If you have
questions about remitting payment, please contact our controller, Becky Xxxxx,
at bxxxx@prokoconsulting.com.
-- Liz
John Doe, General Counsel of XXX IT Solutions
Becky Xxxxxx, ProKo Consulting Controller

Key Takeaways

Always have a written contract before you start the work, especially if it’s a new client. My company prides itself on getting through the contracting process quickly. In fact, we often complete the contracting process well after the consultant has started the work. We've done this successfully dozens of times so I didn’t think twice about doing it again. Obviously, this is a mistake with a new client. They had not yet established a track record to warrant that kind of trust. We never did get a signed contract, which made the collections process more complicated, and we lost out on collecting late-payment interest.

Include an interest clause for late payment. Usually these are moot because you're not going to go through the hassle if a payment is a few weeks late. Plus, it can be hard to collect the interest. In this case though, we would have received it. (There's a box for this on the legal forms). It sure would have helped to compensate for all the time and effort it took to collect. If we had a contract with a standard interest clause of 1.5% per month, we would have been paid an extra $1,300.

Keep all your emails. I keep a separate in-box folder for each contract. This made it easy to go back and find the ones where the client agreed to the start date, duration, and pay rate. Without a contract these emails would have been sufficient evidence for court.

Pay attention to your instincts. I had a bad feeling about this arrangement after just one week when I couldn't get the client to complete a contract. She was busy and focused on preparing for the oral presentations. Maybe my sense of professional courtesy (or just plain empathy) got in the way, but I should have taken a harder stance. I should have told our consultant to stop working until we had a signed contract. For me this was the biggest lesson learned: be less trusting until the client has earned that trust, at least when it comes to contracting and collections.

I certainly hope you’ll never be in this situation, but now you know what to do if you are.


Note: I am not a lawyer, nor do I pretend to be one. This article is practical advice, definitely not legal advice.