Managing Nonpayment Situations
Once in a great while, polite correspondence between you and a client about an unpaid invoice stops being productive. You need to take a more aggressive approach to recuperate at least some of the money that you're owed. If things get really bad, I found that threatening letters from attorneys can be helpful.
Depending on the amount owed, your best option may be going to small claims court. You can get a judgment against your client if you are able to prove that you performed according to the contract, and that the client owes you money. This may or may not help you. Small claims court can pass a judgment in your favor, but that doesn't make cash magically appear. It does give you the leeway though to garnish funds from their bank account. Small claims court resolves disputes under $7,500.
Even if the client owes you $10,000, it's sometimes worth it to cut your losses and get a judgment for $7,500 through small claims court. In regular courts, attorney's fees and legal costs can mount up quickly. If what is owed to you is more than $10,000, my recommendation is to resolve the issue through binding arbitration in a city where you do business. These problems rarely happen to me because I'm really conscientious about the language of my contracts. But when they do, it takes persistence and professionalism.
There have been times when I've been persistent, and after two years, I was paid $20,000 that I was owed. But there have been a couple of times where I've had to let payments go that were under $1,000 because it just wasn't worth my time to collect them. Generally, being conscientious of your client's financial health at the beginning of a project is one of the best ways to determine whether you will be well-served to work with them. Following professional protocol and making sure you have signed contracts and approvals for your revisions should keep you out of trouble
