3 Ways Contractors Can Make Sure They Receive Payment

Receive Payment

As a contractor, there is nothing more frustrating than doing work for someone who either puts off paying you or doesn’t pay you at all. These “deadbeats” are out there, and you can be sure that you will one day run into one. You won’t be able to tell upfront because they typically show no signs of being a deadbeat. In fact, they’ll look just like any other client you work for.

When you do find yourself in a situation where you have to deal with a client that is slow to pay, here are 3 things you can do to ensure you receive payment:

1. Well Written Contract

The best thing you can do is be prepared with a well written and clear contract that outlines how the payment process will work, including late payments. This should include the following:

  •      Clear payment terms – including how much is due and when it should be paid
  •      Consequences for non-payment
  •      Service fee or charge for late payments
  •      Provision that client will be liable for attorney fees if payment isn’t received
  •      Clear statement of the work that will be performed
  •      Timeframe of when work will be completed
  •      Provision for situations that may arise that might require additional time
  •      Plain language that is clear and easy to understand
  •      Requirement of signature before work begins

The goal isn’t to scare prospective clients away, but to protect yourself should things take a turn for the worse when it comes time to collect for the work you’ve done.

2. Do Some Research

Once you have discussed the potential of doing work for a client, spend some time doing a little research on them before you jump into a contract. You might find after doing just a little digging on the Internet, that this client has a history of not paying for work. Check for criminal records, bankruptcy filings or any pending suits or judgments.

This may feel a little strange to begin with, but all it takes is one client to give you grief about paying their bill before you learn that doing a little research might just save you from quite a bit of trouble down the road.

3. Collection Policies and Procedure

Should you find yourself in a situation where you are waiting on payment from a client, you can help speed things along by having a good collection procedure in place. Since these things tend to take quite a bit of time, the more prepared you are to begin with will make a significant difference. You might include the following:

  •      Telephone calls – these are much more difficult to ignore than letters
  •      Unannounced visits to demand payment
  •      Prompt attention – DO NOT PROCRASTINATE! Statistics prove that the longer you wait to start the collection process, the less likely you are to see your money
  •      Small Claims Court – Quick and easy solution that only costs about $50
  •      Hire a professional – debt collection agencies can go to work for you to help you get payment

Related: 3 Things You Can Do Mid-Year to Prepare for Tax Season

Hacker Accounting can help with this process by keeping your invoicing, bookkeeping and receivables in good order so you know exactly when to move to the next step. For more information on how we have helped others maintain a well run accounting department, call us at 602-375-5251.


Chris Hacker
Chris has been working in the bookkeeping and accounting field for over 15 years preparing business, income and payroll taxes. Chris has a bachelor’s degree from Arizona State and is an Enrolled Agent with the Internal Revenue Service.