Make it Work
Make it Work
It’s a freelancer’s worst nightmare: You’ve spent hours launching a campaign or project, but when pay day rolls around, the client disputes the payment, or worse, disappears completely. What can you do? We asked several experts:
Have your agreement in writing
“If you have a contract, then you could resort to legal remedies in civil court. It’s still possible without a contract, but much harder,” CPA Cameron Keng said. While verbal agreements are still considered contracts, “It’s hard to prove the intent of the non-written contract.”
Even with a contract, taking a client to court can be a daunting task. Without a contract, “… the process could take more than a year pretty easily. Having a contract would make this much quicker because it just means that the judge would throw out your case or the client’s attorney would just say that they have no case,” he said.
Founder of Cyberlaw Studio Julia Cheng agreed, “Email agreements may be enforceable, but to save time (and hence, legal fees), it is best that all the terms are in one complete email as opposed to various email chains.”
Write in penalties and get a deposit
Cheng encourages freelancers to write penalties into their contracts. “In the contract, include language saying that the freelancer will be entitled to attorneys’ fees and costs in event she needs to engage a collection agency or attorney to assist with collection. If possible, insert terms for late payment penalties,” she said.
Before accepting the job it might be best to get some of the money upfront. “I advise my clients to get a deposit on the work upfront, have a contract in writing, and to keep good records. At tax time, it will be crucial to know which client is not paying the bill. If a freelancer exhausts all means of collection he or she might be able to write income off as uncollectable and not pay tax on the money they will not receive,” CPA Gina Noy said.
Make it worth the effort
According to Keng and Cheng, collecting back payment can be cost prohibitive if the dollar amount owed is under $10,000. Make sure you make it worth your time, otherwise, you can spend your money on lawyers instead of making the money you’re owed. “Dollar amount—this is a tricky issue. If dollar amount owed is low, it may not be cost effective to engage an attorney. However, in New York, freelancers can represent themselves in Small Claims Court for amounts up to $5000 ($3000 for Town and Village Courts),” Cheng said.
Be prepared to argue the case
“Preparation is everything” nonprofit manager Nate Heasley said. He represented himself against a nonpaying client. “You have to have documentation and evidence … and it helps to have witnesses,” he explained.
In suing a company for nonpayment, this could mean using the power of subpoena to bring in the company’s CFO or controller to testify and presenting them with documented evidence such as dates of phone calls, invoices, etc. Nate pursued his nonpaying client in small claims court. “In my case I ‘went nuclear’ and subpoenaed the board members of the organization who knew about the nonpayment just to make sure that I was inconveniencing everyone as much as possible. The company settled with me the day before we were supposed to appear in court.”