This week has been an odd week. I’ve had to terminate 2 now ex-clients of mine.
One of the clients did not want to pay their monthly retainer, and the other one decided to go elsewhere.
Client terminations are a natural path of any successful web designer. We have to let clients go and be positive and professional. Trouble is, should we just let them go if they are no good, should we push them to go, or should we try to hold them as much as possible.
In my case both client’s where not worth the time and neither of them wanted to pay particularly. So I don’t have any regrets in those regards.
I would love to here people’s experience on client terminations. In the first 2 years, this would have had to be the first time I had terminated a client, and 2 clients within the same few days! O.o
I’ve often been successful with price increases, and making sure I communicate clearly about the time I bill them. I had one customer that seemed to always wanting to ask tons of questions, and would take the project in all sorts of directions. I let them know that if they need more attention to planning and details to the point I needed to spend valuable time on the phone and on skype or even in person meetings, then I would need to do two things. First, I needed to increase the rate I billed by a few dollars per hours, and second I would need to include this communication time in the bill, not just billing for development time as in the past. Not only did I make more money off this customer, the profit was increased.
But when do you know when to draw the line? When do you inform them of this. Obviously on first few questions you can’t be so demanding, and once the client becomes accustomed to your pricing they won’t take it well if you start to increase it due to their over-demands.
That’s exactly what I was thinking when I first read your post, Sega.
On the one hand, no business can succeed unless it focuses 100% on customer satisfcation. It doesn’t matter how much you dislike the client, or how much hassle they cause you, the fact is they are still a customer. A business must always go out of its way to keep the customer happy - even more so when it’s a professional relationship, as is the case here.
On the other hand, if the client is actually causing you to lose money - as will be the case if they are reluctant to pay you - then you might well decide that keeping them happy is just not a good option for you, and that it’s better to get rid of them.
Personally, before terminating a client, I would really want to be sure I had done everything possible to salvage the situation. Usually, that’s a question of communication. A lot of problems can be solved by means of an open face-to-face discussion with the client. There’s no harm in spelling out the problems, and trying to find a way of solving them.
But, ultimately, if that doesn’t succeed, then termination is the only possible course. Don’t feel bad about that. It’s not as if it happens every day. (The fact that you terminated two of them within a few days is just the way it falls - it’s not a trend.)
I would only add that, if termination is inevitable, be sure to do it in a polite and professional way - and one that leaves the door open for a possible re-engagement in the future. If the client had a change of staff, for example, that might be an opportunity to start afresh, so don’t burn all your bridges too soon.
Many, many problems arise (in any situation among people) from misaligned EXPECTATIONS. Often, a dispute or perceived problem can be avoided entirely by properly setting expectations. And this is accomplished through direct, concise communication, as @Mikl; pointed out.
I congratulate you, @Sega;, for making that ‘hard’ decision to turn away a customer. But, in the end, it was just a matter of making a good business decision.
From what I see you need the customers, but paying customers, we can all do without those who delay payments for months if not years. I’ve now come up with a new procedure of the cut-off point.
I would only add that, if termination is inevitable, be sure to do it in a polite and professional way - and one that leaves the door open for a possible re-engagement in the future. If the client had a change of staff, for example, that might be an opportunity to start afresh, so don’t burn all your bridges too soon.
Basically 30-days from invoicing their account will be in suspension. 15-days after this their account will be terminated with an option to return.In other words they would have 45-days to pay their dues. Only upon arrangement can this be bent a little. I must stress I have one client who never answers his phone or emails, so how would you communicate to a person like this? In either case his account is now suspended and pending termination.
Clients can return, but they must pay for my time to re-instate their account and re-install everything back on the server as they’ve been terminated.
I now make my money from the hosting, domain, support and management. This is covered in the monthly retainer. For the moment this is around 15 GBP. per month. If a client does not pay this, then they must leave, and this is how I see things. I really can’t carry dead weight any more.
Initially I did, but now it’s passed. After looking back at it I really don’t think I made a bad decision. If the clients play tune to my music it’s worth working. If the clients don’t play tune and delay payments months on end, then there is no two-ways about it. I can’t make money and survive, and they aren’t helping me run my business, so they really must go.
Apart from all what was said above. I personally find that non-paying clients drag your business down. You somehow feel demotivated to work as everything is working against you. Why on earth would somebody want to keep somebody like this on? It’s when we don’t know what to do with those clients that we have an issue. This is why knowing a procedure for problem clients is the best way to go.
Basically 30-days from invoicing their account will be in suspension. 15-days after this their account will be terminated with an option to return.In other words they would have 45-days to pay their dues.
We clearly all agree on the main points on this subject. But I would say that 30 and 45 days would be much too short in most cases. Would you really suspend an account only 30 days after invoicing?
In most businesses, 30 days is the normal credit terms granted on an invoice. That’s because many companies work on a monthly payment cycle. All invoices that are to hand at the end of a month are flagged for payment on, say, the 20th of the following month, with another two or three days needed for the payment to reach the supplier. So, the time needed to pay a given invoice can vary between three and seven weeks. It’s true that might exceed the agreed 30 days, but that wouldn’t be a reason to take action against the customer. They’re not going to make a special case for you just because you start chasing them. And I definitely wouldn’t suspend their account at that point - or even threaten to do so.
Much better to institute a planned credit control timetable. First, make sure your invoices reach them towards the end of the month (assuming you submit your invoices monthly). Then give them six weeks (that is, half way into the month after the month in which they should have paid), and then send a friendly reminder. If you get no reply, follow up with increasingly severe reminders, gradually leading up to suspending the account and threatening legal action.
There’s comes a point in that timetable where you decide that getting your money is more important than keeping the customer. You’ll have to decide for yourself where that point lies, but I really think that 30 or 45 days is too early. You’ve got to keep in mind that, in most cases where the customer pays late, it’s not because they want to cheat you, or they can’t afford to pay, or they want to squeeze some extra overdraft at your expense. In the majority of cases, it’s a simple case incompetence or laziness. Typically the invoice is sitting on a manager’s desk waiting for approval, and the manager hasn’t got round to do anything about it. In those cases, I would definitely give them a hard push, but I wouldn’t risk jeopardising the relationship.
30-days might be too soon. Let’s say 60-days, but this would mean they would owe me for 2 months. Nobody in their right mind would go through legal action for 30 - 50EUR. The 2 month period or at very latest 3 month period needs to be the termination date. Other providers like 1&1 internet cut them off once their account expires. Internet providers do the same, telephone companies and television (e.g. Sky) also do the same.
Why do I have to wait for 3 months to get paid, something which should ideally be paid within 14-days.
I don’t mind being cheap, or discounted in my pricing, but the invoices needs to be paid early. The issue with being too cheap is that you end of having people take advance of you, and think of you in a lower light to the point where they would not honer their commitments, and even neglect paying you. I don’t particularly want to increase my prices, so the other option is to have a harsh methodology to payment with enforced termination.
This would give some authority to those low prices and justify things. Cheap and cheerful with a clause.
This is how budget airlines works and they seam to be doing amazingly.
I think this is the way forward. Having customers owe me month’s on end if not preferable in this day and economy. Instead, it would be best to have discounted prices with enforced termination.
So the real question is when should termination be done?
Sega, I started out agreeing with you, but we’re moving further apart now.
You seem to be saying that, because your prices are low, you should expect to be paid sooner than is normal in our market sector. That it’s your customer’s fault if you are not getting the money you need to run your business. But if the only alternative to putting up your prices is to instigate your “harsh methodology”, then that’s the fault of your business model, not of your customers.
You draw comparisons with budget airlines, telecoms companies, TV companies, and the like. If you are providing those kinds of services, then of course you are right to cut off the supply as soon as it becomes clear that the customer isn’t paying (in fact, you should be charging in advance, just like most of those companies do). But I assume that, like most of us in this forum, you are in business to supply professional services to business clients: web design, or consulting, or SEO or whatever. That’s not the same as providing a mass-market service to consumers. It’s more like the service you get from your accountant or lawyer.
If the above assumption is wrong, and you are in fact supplying a mass-market service to consumers, then that’s an entirely different matter. In that case, the cut-off point should be made clear in contract, and you would of course be perfectly right to enforce it as necessary.
I have 2 types of clients, the mass market ones and the specialized ones who require a little care. The ones which require a bit of care rarely have issues with payment, as they depend on their emails etc. for their smooth running of their business. Unfortunately the cheap ones, often your typical tradesmen might require a different approach. This is where I am getting at.
What I am trying to do is balance both categories of customers and know of a duration of account suspension and termination. Like I said, I’ve only ever terminated 2 people. One person I waited 5 months for payment, and the other one was terminated upon mutual agreement, so there was nothing really owed there.
Please understand, I do not yet have a ‘harsh meteorology’ in-place, but I am trying to figure something out. I have however found that when you suspend a client they do pay you almost instantly, unfortunately this might be a requirement for some to part with their cash.
I would be interested to know on your point of view, and when you know to suspect or terminate somebody. There needs to be some guidelines. We can both agree that begging for payment with a dozen or so email reminders isn’t something we should be practicing.
That’s makes things much clearer. I understand now what your situation is. Clearly, you need a different approach for your mass market clients than for your “bit of care” cases.
What does your standard contract say about late payment and termination? If the contract is not clear on those points, then that’s the first thing you need to attend to. I suggest you consider something like: The service will be billed monthly, for settlement within seven days. If we do not receive your payment within that period, we reserve the right to suspend your account without notice. You may re-activate your account at any time by paying all outstanding amounts.
Having done that, I suggest that, in the event of non-payment within the stated number of days, you wait a further three to five days (just to allow for the occasional inevitable delay), and then send out a single reminder stating that the service will be suspended 15 days from now unless payment is received by that date. After that, you go ahead and suspend immediately. And I would suggest suspension rather than termination.
Let me stress that the above applies to the so-called mass market cases (maybe that’s not the ideal term, but never mind). For the others, you need a more personal approach, with more leeway, along the lines I suggested earlier.
Absolutely. Begging should never be part of credit control. Friendly reminders; firm reminders; insistent requests; threats of legal action: these all have a place, but never begging.
Yes, given the nature of your work, you should definitely have a standard contract. It should cleasrly spell out the payment terms and the consequences of non-payment.
You won’t be able to impose a new contract on your existing clients, but you should apply it to all new clients. Remember, you can only enforce a contract if the other party is aware of it and has agreed to it in advance.
