I worked for a client and they won’t pay me, now what?

Dealing with unpaid invoices for your business can be a headache.

Many businesses in Ontario lose vast sums of revenue because of delinquent accounts and customers who fail to pay for goods and services that they received. Unpaid invoices are an inconvenience for large businesses, and can be critically harmful to small business owners.

We’ve listed 5 things you can do to ensure you get paid.

1) Have a solid contract                                                                                                                              Regardless of whether you have a formal contract, you can still take legal action to get paid for your work. That being said, it’s a lot easier to prove your case when you’ve got a solid contract. Contracts, at a minimum, should identify who the parties are, their address and full name, what you will do for them, the associated prices, and what happens if an invoice doesn’t get paid. Will the client be required to pay for you legal fees if you have to hire a lawyer to collect your money? Is there a specific interest rate for overdue invoices?

2) Get them admitting it in writing                                                                                                                      It’s all about documented evidence. A few simple text messages can be extremely helpful during the legal process. For example, let’s say you send a quick text with something like “Did you receive that invoice I sent to you last week? It was for $700, can you please let me know when you plan to pay that”, and your client responds with “I saw it, can you give me a couple of weeks?”. Well, you’ve just got them on record admitting that they owe you the money. If they don’t pay you within those couple of weeks, and then mysteriously disappear, it will be very hard for them to testify under oath in Court that they had no idea about the bill or dispute their requirement to pay it.

3) Send an invoice                                                                                                                                              Again, this might seem obvious, but a lot of business owners make the mistake of doing everything on a handshake. Download a template or sign up for Quickbooks and make sure you remit a proper and professional invoice to your client. Invoices should indicate the date the invoice was issued, the name and address of the client, an invoice number, exactly what goods or services were rendered, your HST number, an interest rate, when the invoice will come due, and a clear indication of the subtotal, taxes and total amount.

4) Stop providing services                                                                                                                                  This solution may be helpful or not depending on the situation. If you provided a one-time service and the client no longer needs you, like a kitchen renovation, then this won’t help. Also, if you have a contract where your discontinuance of service could constitute a breach of contract, then you must also be wary of that issue. That being said, the last thing you want to do is to keep providing on-going services and letting your client run up a huge bill.

If you are afraid that you might lose the client by exercising a firm hand, remind yourself that you don’t need such clients to begin with. Your business is not going to survive with an abundance of clients who don’t pay their bills. Giving notice that you intend to stop providing services shows your client that you are serious about your fees, and that you respect yourself enough to demand payment, with the possibility of adverse consequences if payment is not made.

5) Use a debt collection lawyer                                                                                                                              If you wait longer than two years, you’ll lose your chance to collect. So if all else fails, lawyer up and take action within that limitation period.

Some people may be tempted to use a collections agency instead of law firm, and one of the primary selling-points for such agencies is that their standard approach is to charge on the contingency basis described above, but if you’ve got yourself a lawyer, then you might as well choose that option. Here’s why: collections agencies are bound by strict laws and cannot actually enforce your rights in Court. Most people just ignore calls and letters from collection agencies. Lawyers, on the other hand, are not bound by the Collection and Debt Settlement Services Act. They can obtain a Court judgment, and then proceed to seize the assets of your delinquent client or garnish their wages. In a lawsuit, if the Defendant loses and they have money to pay your bill, then that bill will get paid whether they like it or not.

Got a question? Book a consultation with one of our lawyers by clicking here.


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