Ask HN: Freelancer's Dilemma – Client Won't Pay Despite Clear Agreement

[alexliu518]

Hi HN,

I'm a freelancer working on various software development projects through different platforms. Recently, I completed a significant project for a client outside of these platforms, and they're now refusing to pay the final invoice. Despite having a clear written agreement and delivering everything as agreed, they're ignoring my emails and calls.

Has anyone here faced a similar situation? How did you handle it? Any advice on legal actions, or ways to secure payment upfront in future projects? Appreciate any tips or resources that could help!

Thanks in advance!

[tinco]

In addition to the advice that's given here, make sure you detach yourself from both the process and the outcome as soon as possible.

After you had your lawyer send them an angry letter (twice) and you haven't got your money after two months, you need to emotionally accept that the money is likely gone, and make sure that you are mentally capable of focusing on ensuring your financial stability.

Either set an automated mail to remind them what they owe if it's a small amount of money (i.e. less than 5k) and if it's more ask your lawyer if they or someone they know can handle the case on a fixed price basis.

And then move on. Non paying clients absolutely suck. I haven't had one that didn't pay at all (though some very late payers), but I've had friends tell stories and it can wreck your freelance experience. If you let them get to you then you'll lose the feeling of freedom and all advantages of freelancing. Accept that it's part of the game and account for it in your financial planning. If you don't the stress will eventually kill all enjoyment of being a freelancer.

(Btw, I don't mean give up. Just dissociate from the outcome. If the only fee your lawyer would take is 100%, still do it to f with the lousy client.)

[woutr_be]

I've recently dealt with this over a 8 month period, and it was mentally exhausting. I wish I would’ve just accepted the money to be lost, and let a lawyer deal with it, but instead spend 8 frustrating months trying to deal with it.

In the end I lost far more money than just what my client owed me. For months I couldn’t focus on work, and just wasn’t mentally able to find new clients.

[patrakov]

In Russia, if it is a foreign client, the OP would have been fined by the government for the amount that the client owes him, now that the OP publicly admitted the non-payment. This is done because there was a tax evasion scheme based on allegedly-unpaid invoices from foreign "customers". So it is already 300% of losses (100% due to the unpaid debt plus 100% from the fine plus 100% from the lawyer).

[varispeed]

In the UK that would be very simple. Send statutory demand, let's say give 21 days to pay and tell the company if they don't you'll file a winding-up petition to the court (basically if company can't pay its debts it will be closed).

Usually then company pays straight away.

[jenscow]

I've had this too.

Be pragmatic and move on (mentally), and don't make it personal nor seek revenge. I'm sure it would be tempting to make them suffer like you have, but if doing so will make you worse off then you already are (be it financially or emotionally), what's the point.

Accept the base line outcome is zero, don't make it less than that and anything extra is a bonus.

[itsoktocry]

>you need to emotionally accept that the money is likely gone, and make sure that you are mentally capable of focusing on ensuring your financial stability.

Good advice.

And also understand that it's possible they can't pay. That's not an excuse, and doesn't mean you shouldn't pursue restitution. But the reality is: shit happens.

[atlantic]

Yes, I have handled a situation like that once, in which the client refused to pay and cut off all communication. It was a remote cross-border gig, and there was no way I could afford a lawyer in the client's country.

After struggling with the problem for a few weeks, I located a debt-collection company, and decided to offer the debt to them, and all related documentation, so they could collect it for themselves. I then informed the client of my intentions via email. I said: I'm never going to see this money, but neither are you.

They got back to me within a couple of hours, and paid before the end of the week.

[Suppafly]

Honestly, that's the way to do it. Let them know that you'll sell the debt to someone that is able to screw up their credit.

[blackhaj7]

So annoying that it had to get to that. I hate people who do this, scum of the earth.

Glad you got your money back

[aitchnyu]

Umm, which part of the world and are they legally grey or white?

[ClearAndPresent]

As a palette cleanser and loin girder: https://www.youtube.com/watch?v=jVkLVRt6c1U (You already guessed it was Mike Monteiro.)

For this project:

Did they refuse to pay actively ("We won't pay you."), or passively (No replies to emails.) The latter might be incompetence.

As others mentioned, specific legal advice depends on respective jurisdictions, but an offical lawyer's letter sometimes wakes up legal when accounting is drifting.

Did you deliver the final access to the code / server / credentials? If not, gently bring servers, DBs, platforms to a halt pending final payments.

Future projects:

Contract, always.

Up-front commencement payments, always.

Price yourself higher in the initial quote, and ask for staged payments, such that by the time your delivery schedule is 50-75% done you are 100% paid.

You control the source code accounts, you control the server credentials, you control the database access credentials, you hand over final access after the final check has cleared.

[labcomputer]

> Price yourself higher in the initial quote, and ask for staged payments, such that by the time your delivery schedule is 50-75% done you are 100% paid.

Related to this, another technique I've seen used:

* Figure out whatever price you want to quote

* Add 25% to that.

* In the formal quote, show the 125% price and a 20% discount for timely payment of your invoices (however you define that in the contract, maybe 30 or 90 days).

* The final bottom line price is the original price from the first bullet point.

When the client "forgets" to pay, you draw their attention to the terms of the discount and that, without the discount, they will owe 25% more.

[opless]

Absolutely.

FU Pay me.

A polite email to the Finance director, or CEO ought to do the trick, and wait a week or two, warning them about the consequences of non-payment and interest on the debt.

Then after the time limit has passed pop down to your local court house to file a small claim or a winding up order if your client is local. You could also sell the debt to a third party. Then it's their problem.

[ChrisMarshallNY]

> As a palette cleanser and loin girder: https://www.youtube.com/watch?v=jVkLVRt6c1U

An absolute classic. Well worth the hour or so to watch.

[15155]

Every attorney adds the maximum-legally-accruable interest rate to every invoice they issue and retainer agreement they execute. You should too.

[ufmace]

It's a good video, but I think some people may miss the point.

You SHOULD be working with a good lawyer ahead of time. You should NOT be regularly suing your clients. Actually suing is expensive, time-consuming, and painful.

You should have a solid, enforceable contract set up ahead of time that you require new clients to sign, and get your lawyer involved if they want to change anything. The contract should ensure that you are within your rights to stop work and take away things they want if they aren't paying on time. If you do it right, you have a smooth and easy escalation path for non-payment, they're the ones who find themselves in a bad situation and have the option of either trying to sue you or just pay you the originally-agreed-upon amount.

I'm not a lawyer or your lawyer and don't even know what jurisdiction anyone is in, so don't do anything without consulting one. But the idea is something like, you only transfer control of servers and services to the customer upon being paid in full, no exceptions, and if they are behind on payment by some particular time and amount, you are explicitly within your rights to shut down services or block their access until such time as their account is paid up.

It's interesting how a good contract is kind of like a good program. The happy case is only like 20% of the work, the other 80% of the code or contract is all about detailing every possible way the happy case could go wrong and exactly what happens when each particular way of going wrong happens.

[issa]

Back in my freelance days I had a client who refused to pay. I took him to small claims court and won. Actually collected the money.

- small claims court is very easy and relatively quick. no need for a lawyer.

- there is a cap on the amount, so I won $10k, not the full amount owed. But close enough and much better than $0.

- make every reasonable attempt to resolve this prior to filing but, as stated throughout this thread, do not stress yourself out. This should be a fire-and-forget process. Consider the money lost, and if you win, it's just bonus.

[alsetmusic]

> Consider the money lost, and if you win, it's just bonus.

I think this is the most important part of the advice. Treat it like a gambling budget that you can lose without feeling bad about it. I know that’s harder to do retroactively than setting aside $200 in chips to play cards, but start adjusting your finances now for that possibility.

I was in this position only once and the person who ripped me off got away with it because the amount of my time spent was small enough that it wasn’t worth pursuing, so I’m not a great example of success in this area. But I’m still mad about the fact that I was treated that way and switching to an “it’s gone” mindset helped me process my emotions about it. My anger is now principled rather than emotional.

[Supermancho]

If you can do small claims, you should. I have won and lost in small claims, but it's very simple. A matter of filling out some paperwork and an hour or two (unusual) in court.

[Alupis]

Simply winning at Small Claims Court does not guarantee you win money. Often collecting the money is difficult, impossible, or too expensive.

[codazoda]

Are you close to them? I hired someone (a friend) to go to their office and present the invoice in person. They told him that the finance guy was out, so he said, “I’ll wait” and he made himself comfortable in a chair. They paid him the full amount around 10 minutes later.

YMMV!

You could probably turn it over to a professional collection company as well.

[sjsdaiuasgdia]

This can be a shockingly effective tactic. Some years back a small business failed to pay me my final check after letting me go. After a few weeks of calls that were not returned, I just went to their office and said I wasn't leaving til I talked to someone with authority to resolve the situation.

15 minutes later one of the co-owners wrote me a personal check for what I was owed. It's far easier to ignore a voicemail than a person standing in front of you.

[alexliu518]

Very direct and efficient processing method

[caseysoftware]

First, check into who owns the code. With most Work for Hire agreements in the US, the client owns the code.. it may be squishy/unclear on when that ownership occurs. When I still consulted regularly, I had a lawyer note that ownership is not transferred until all invoices are cleared. It was never challenged in court but gave me some leverage.

Second, understand where the code/system currently is. If it's on your server (defined as a server you own or rent), you have different options than if it's on their server.

If it's your server - unless you have a commitment to continue providing the service - you may be able to shut it off immediately.

If they have granted you access to their server for the "duration of the project", you may be able to make the argument that the project isn't over yet and do things.. but speak to an attorney.

Either way, if this is a mission critical app for them, disrupting their business can cause other difficulties for you that you don't want.

Collect the information you have - agreements, records of payments, commitments (written are best, verbal are usually worthless), and ownership - and speak to an attorney. In the US, many lawyers will speak with you for 30 minutes for free as they evaluate your case and lay out options.

[RobertRoberts]

> With most Work for Hire agreements in the US, the client owns the code..

I think you have this backwards. By default the creator owns the code. (unless you agree in writing otherwise) Some exceptions I am aware of (IANAL) is if you are an employee, then the employer owns the code by default.

Under the "work for hire" clause, I think (?) that if you are commissioned for the work as an individual, you should have the copyright by default but may not have the copyright based on agreements made. But if you are commissioned as a business entity, your business entity would own the copyright. (again, unless explicitly agreed otherwise)

If someone else can chime here, as I may be wrong on this.

https://en.wikipedia.org/wiki/Work_for_hire

[hristov]

What country/state are you from, what country state is your client from and how much money are we talking about? In the US there is a fairly straightforward process to sue someone in small claims court without a lawyer and with fairly small fees. But small claims courts are limited to small awards.

I have not worked as a freelance programmer nor hired any, but a friend really likes to hire freelancers for various projects and often asks me for advice and tells me about his travails. I think practically speaking, it is not that hard for a freelancer to get paid because software always needs upkeep for bugfixes or updates to work with other software or to add new features. And it is far far far more expensive to have a second freelancer look at the first freelancers code and do the updates.

Some people say it takes more time to read code than to write it. I am not sure if that is true but very often if you ask a second freelancer to do minor updates on another freelancers code, the second guy will just say that the code is so awful the whole thing has to be rewritten from scratch. So you have a big advantage just by having written the stuff and having the code in your head and written in your style. You are the best man to fix it and update it by far.

My friend always pays his bills but he is a very tough negotiator, and often gets comparatively good bargains for freelance work. However, all the benefits of his bargains disappear when he needs the software to be changed a bit in six months or so. Then the freelancer is in the drivers seat and my friend completely drops his tough negotiator stance and becomes super nice and friendly towards the freelancer.

So if you do not want to pay for lawyers and small claims court is not suitable for some reason, you may just send a demand letter saying that you are charging a 20% penalty for non-payment and interest will accrue in the future, and just wait for your client to need some update and then you demand that all previous invoices be satisfied before discussion for new work even begins.

IANAL, this is not legal advice. If the sum is a large amount, it would probably be best to consult a lawyer.

[adriand]

Some good advice in here but one note of caution: you mention that you work through different platforms, and that you completed this project "outside of these platforms". It is fairly common for these platforms to require you to agree to terms that prohibit you from working directly with clients that you initially connected with on the platform. If you met this client on a platform like that and then violated your agreement with the platform, then you may have some legal exposure there, possibly including exposure that your client could leverage in a negotiation or legal proceeding.

More generally, this kind of situation demonstrates that these platforms do in fact provide value to the parties involved. So if you're a freelancer and you're considering working directly with clients, be aware of the risk of non-payment.

[carlosjobim]

A real world court would not give a damn about that, because it doesn't have any relevance to the case at all. At worst, OP and his debtors could be kicked from that platform.

[tardy_one]

From what I've heard, most of those sites side automatically with the customer giving you rights similar to a merchant in a credit card transaction, or really a bit less since that might be all the leverage they actually have and they don't really want to spend their income trying to arbitrate and lose customers who may pay next time.

[duckmysick]

Look into invoice factoring services. You sell your invoices to them and get paid upfront. They get a % of your invoice and/or a small processing fee.

Ideally you want a non-recourse factoring agreement (the one where the factoring company takes most of the risk of non-payment), but it might be difficult to get. It helps if you can show that your previous clients paid on time. But then again the freelancing platforms handled that for you.

In any case, it's worth asking around. Have your lawyer review the factoring terms before you agree to anything.

[abc123abc123]

Amen!

Fortunately I only had this problem once, and for me, the way to resolve it was first, with the client. Nagging, explaining to them that if they do not pay, I will sell their invoice to a invoice collection agency, that, if they choose not to pay will affect their credit rating and reputation blah, blah.

The trick is to do this in a serious way, but not overly confrontational and to be clear that all it takes for them is to pay the invoice.

After 6 months of this dance, I said, enough is enough, and initiated the procedure of finding an agency, and then, lo and behold, they paid.

In retrospect I should not have waited 6 months, but your learn with experience. =)

[kevinsync]

I'm 100% freelance -- my engagements tend to be monthly retainer or monthly invoices, and whenever possible I try to avoid contracts because there's simply no way on Earth an unpaid invoice for max 30 days of work would exceed the costs of taking somebody to court (and actually collecting the money) if they don't pay. Not to mention that somebody who refuses to pay for a month isn't going to willingly pay out the remainder of a broken contract.

My clientele is found mostly word of mouth, people I actually know (or have worked with in the past in a W2/corporate environment). I find the most success working with digital agencies and small businesses because they both have strong incentives to pay well (and pay on time).

I treat the work I do as service, rather than something more impersonal (strict deliverables, generic staff augmentation, etc) -- at the end of the day, my role is to help them solve real, immediate problems for their business by being patient, present, cheerful and competent help.

In the unlikely event of a client relationship souring, I just let it go. Chalk it up to the game, use it as fuel for bigger and better things, whatever. I guess I can only do that because I keep everything piecemeal, bite-sized, running in tandem to each other, and have many pans in the fire at any given time.

Anyways, apologies for the tangential rant -- other commenters have offered very effective and actionable advice for your particular situation. I figured I'd just chime in on how I've managed to avoid the situation most of the time.

[mikey-k]

Would love it if you can share rates & how much time you spend on billable hours vs how much time you spend managing your practice & hustling. Also, if you're specialized in any niche areas?

I'm in early stages of exploring a similar thing. I'm willing to take a pay-cut for increased flexibility and time off. I've got a stupid-high big-tech comp package at this point, so I'm expecting pay cut to be significant. I'm just not sure how significant. I'm also unclear on how specialized/niche I would need to be, or if there's a market for "highly experienced generalists".

[thr0w]

> have many pans in the fire at any given time

Yeah, this is key. The emotional equivalent of fuck-you money.

[sjducb]

Can you put a licence fee checker into the code?

I’ve quietly released license enforcement into a client’s system before. They paid up very quickly.

“Your licence has expired. Please contact xxxx for a new license”

[supportengineer]

This should be higher. The default shouldn't be a system that works perfectly indefinitely.

[papaver]

just let it go and move on... don't let the negative energy eat you up, it's just not worth it.

i was screwed out of over 6 months of pay north of $50k. i wasn't keep tabs on the payments and i wasn't keeping detailed records of my work. both things i no longer let slide in any way. i spoke to many people and lawyers, but decided to move on and let it go.

in the end how much money and time and energy do you want to spend on another lousy human being or entity? it only hurts you emotionally and takes up valuable time to focus on more productive things. ten years later it's a blip in my life that forced me to learn and be better about picking clients and billing, etc. don't let the 10% ruin your work with the other 90%.

[olddustytrail]

I'm sorry you lost your money but that's really bad advice. The proper solution was given below: send a letter (real, snailmail) demanding payment within 14 days or the debt will be passed to a debt collection agency.

If there's no response just do that. If you have a good paper trail you can get half your money from them and then forget about it. Plus you have the happy knowledge that the collection agency don't take no for an answer and will literally turn up at their office with a warrant and start taking equipment out to cover the debt.

Edit: I just noticed you said you didn't have a good paper trail. Well, an expensive lesson but I'm sure it's one well learned! :)

[escanda]

The best advice in this common mal practice is setting as base law court your jurisdiction; the farer the better.

For instance, I am in Spain and I always signed contracts based in California, etc. Badly done! Next time I will set Madrid, Spain courts as ruling law.

This way you can sue the ass off them and make them pay the money in debt and even some more to the courts.

edit: typo

[fallingknife]

Unfortunately that will probably not do you much good. If the company is based outside of Spain all the Spanish courts can do is take their assets located in Spain which is probably nothing.

[adastra22]

Doesn't that make it easier for a California company to just ignore you?

[CPLX]

Everyone is talking about the legal approaches, or fine print of contracts, and so on.

But if you want the real answer, like what actually works, then try to shame them in public or to people they care about.

Like if the CEO posts on LinkedIn, post underneath saying "How do you reconcile this with not paying your freelancers?"

Send an email with every single person at the company you have an email address for, ideally including the top people, copied, and ask them the same question, while asking if this is a common problem at the company, like are you guys all getting your paychecks on time, or is this just something you do with freelancers.

If your client has case studies or a list of their client's logos on their website take a guess at who their contact would be at that client and reach out to them via email, copying your contact at the offending company as well, asking them if they've had any issues with financial misconduct at the offending company during their engagement with them, because you have.

Clearly there are pros and cons to this approach, and your own reputation to think about, as well as fully burning the relationship and so on.

But assuming you're OK with all that, this tactic, unlike the others suggested, is completely free and exremely fucking effective.

[karaterobot]

I spent 13 years as a freelance consultant at my own company, or at small consultancies I worked for. This happened to me a few times.

First off, if possible, you want to stage your contract with multiple deliverable milestones, each associated with them giving you money. When they pay you, you move on to the next stage. It's more upfront work, and more oversight, and just generally more complicated than "I work for a couple of months and then throw the whole thing over the fence, and you throw me a bag of money from the other side". But, the upside for you is less risk and a steadier source of income.

For the client, it builds in more opportunities for feedback, including the opportunity to say "I don't want to work with this guy anymore," or "actually, I'm running out of money and I want to pump the breaks", so it reduces their risk as well.

I never took anyone to court; I guess I got lucky.

I recognize none of this has answered your question. The only real advice I have is that there's got to be a reason they are refusing to pay. If they don't have the money, unfortunately you are probably never going to get paid, even if you take them to court. If they do have money, and are just unsatisfied about something (not necessarily your fault, it's often just a misunderstanding) then I would do everything in my power to figure out what is wrong and fix it. Word-of-mouth referrals are so important to contracting, and often just being really high-touch and communicative with the client—and yeah, occasionally giving them a few hours of free work to indulge their petty whims—can turn an angry client into a happy, paying customer.

[macmac]

Have they given any reason for not paying or disputed the invoice in any way? Which jurisdiction applies to the agreement? Many jurisdictions have fastlane procedures for collecting on undisputed claims that you might be able to use.

[politelemon]

Slightly tongue in cheek, do you still have access to the code and deployment? https://github.com/kleampa/not-paid

[TylerE]

No delivery of code until paid in full. Demo on servers you control.

[oakesm9]

Always have a contract, even for smaller bits of work. That’s the foundation of a good business relationship.

If they have the money to pay, but are ignoring you then escalate from your contact at the company to someone higher in the chain. If that doesn’t work and it’s a relatively small amount of money then you can try to enforce the contact.

I’m in the UK and there’s a small claims court for specifically this. I’ve not gone through it myself but from those that have it’s simple enough to do yourself without paying a lawyer, but it’s time consuming. Im not sure where you are but look into if there’s in in your jurisdiction.

If the client likely doesn’t have the money to pay, then it’s likely a waste of time to pursue it. I had this happen recently when a client went under and ended up just writing it off as a loss. Luckily it was only my time that was wasted so not the end of the world.

[twobitshifter]

My dad did a house renovation job for a lawyer once. It was a ship of Theseus deal where it was really an entirely new house but for local rules they had to do it as a renovation. Anyways, at the end the lawyer delayed payments on several invoices and then on the last one made it close that he had no intention of paying. He welcomed my dad to sue him but let him know that he would make sure the lawsuits lasted many years.

One good rule is to never work for lawyers. Another is to stop work at the first sign of a delay in payment. Lastly, at the very least leave something critical unfinished until paid everything back due.