When previous efforts to collect overdue accounts receivables have not been effective, immediate attention is needed to remedy the situation. A reasonable approach could be for the Consultant to let the Client know that resolving the matter is desired before proceeding with legal remedies available under the contract. If the Client convinces the Consultant that payment is forthcoming, but not right away, the Consultant should ask for a time frame over which the Client expects to be able to make the payment. If that period is acceptable, the Consultant may wish to use of a promissory note that includes the following:
- A “whereas” statement in which the Client agrees that the services have been properly rendered and that the total amount is due and payable.
- A repayment schedule that stipulates the payment amount due for each and columns that show the principal amount due, interest on the principal at the amount allowed in the contract, and total payment due.
- A signature block for the client to sign and date the note.
The promissory note redirects the process back into conformity with the terms of the contract and away from a dispute situation. Of equal importance, the Consultant will then have a document, signed by the Client that preempts any future claim that payment is being withheld due to design deficiencies or dissatisfaction with the Consultant’s services.
If the Client misses the first payment called for in the promissory note and the Consultant still prefers not to pursue legal remedies, the use of post-dated checks may be an option. This option usually is used when the Consultant believes that the Client has some assets but is choosing to give other obligations preference. This process involves obtaining post-dated checks from the Client, one for each month in accordance with an amended repayment schedule in a new promissory note. Because the Client knows that the Consultant is going to cash the check on the date it is due, that payment moves to the top of how payment obligations are to be prioritized. If the Client stops payment on the post-dated checks, the Consultant’s claim becomes even stronger if litigation is pursued.
Having to go to extraordinary measures to get paid is a painful waste of time and energy. The following suggestions may be helpful in this regard:
- Choose Clients carefully. If getting paid by a Client has been a problem in the past, shame on the Client. If it happens again, shame on the Consultant.
- Obtain a retainer that is held and applied to the final, not an intermediate, invoice.
- Have a provision in the contract that allows suspension/termination of services for non-payment of invoices.
- Pursue overdue receivables immediately.