4 ways to handle a freelance client that says they can't pay

You just wrapped a project. You hit "Send" on the final invoice. A few days pass when an email hits your inbox. It’s not good news. Your client says, “Unfortunately, due to the current business environment, we won’t be able to pay your last invoice.”

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Dang, what should you do now? 

First, it’s important to distinguish between a client that won’t pay because of financial hardship and a client that won’t pay because of a disagreement in the provided services or contract. For the sake of this article, we’re going to focus on clients experiencing financial hardship. We’ll assume the contract / agreement was solid, and the service provided were well received. This client just can’t pay. 

Sadly, in our current economic climate this is happening more often. But no matter the climate, as a freelancer, inevitably this situation will arise in your career and you should be prepared. What should you not do? Send a quick, harsh written response. First, take a deep breath. Step back. You may not have the full picture of the burdens and struggles your client is going through. Give them the benefit of the doubt that their situation is hard. Remember, we are all people.

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Now, let’s get to work on getting you paid. There are four ways you can respond to this situation. Each has their pros and cons. And each will take your client relationship in a different direction. But before you respond there are a few key questions on your side to consider before proceeding:

1. How much do you need the cash in the short-term? If this invoice goes unpaid, will you be able to survive? Depending on the size of the invoice, cash in your bank account, and other incoming revenue. If you need the cash now, you may want to push to collect. If it’s a small amount, or you have cash or other revenue coming in, you may not need to push as aggressively to collect now.
2. How important is this client relationship in the long-term? Do you want to work with this client again in the future? Has this been a solid client for you for a long time? If this is a short term, one-time project, then you may lean more towards collecting in full now. If this is a long term client relationship, you may want to lean more towards preserving a healthy relationship. 

Now that you have a good understanding of what is important to you and your business, you can pick a strategy and craft a great response.

1. Be flexible on terms, but hold to your original price. 

We’re starting in the middle ground. A simple change to your invoice payment terms could be all you need to resolve the issue. This strategy can be a win-win for everyone. It can provide your client with flexibility and breathing room while still getting you paid in full. Here are a few options to consider on flexible terms: 

1. Extending Terms. If they typically pay net 30 (30 days from your invoice date), consider allowing them to pay net 60 days or net 90 days. Providing a client with more time to pay can be an easy way to give them flexibility.
2. Installments. Split the invoice into multiple smaller payments. A simple installment plan can spread out an invoice over a few months, making the payments easier on your client's pocketbook.
3. Defer Payment. Postpone your invoice for several months. This is a big accommodation, but in unprecedented times it might be a good option. This keeps your invoice valid but allows them to pay when things turn around for them. 

These are just a few options for term flexibility. Get creative. There are many ways you can tweak terms to work for everyone. This strategy is best used when you don’t need the invoice paid immediately and you want to preserve the client relationship. 

Here is an example response email: 

Hi there, 

I’m sorry to hear about your current financial situation. I know times are hard right now for everyone. I’m willing to help, but I do have to stick to our originally agreed price. I’d like to offer you the option of paying the full invoice in 4 installments over the next 4 months. I hope this helps your cash-flow while still honoring our agreement and the work I provided. 

Please let me know by the end of this week if these terms are acceptable and I will re-invoice. 
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Thank you.

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2. Be flexible on price, but hold firm on terms.

Being flexible on price is always a hard bullet to bite. Especially when everyone already agreed to the price at the onset of the project. But, it’s always an option to consider. You can offer a fixed price discount, like $500 off, or a percentage discount like reducing the invoice by 20%. Doing this will ensure you recoup a good portion of the invoice. Ensure that you are adamant about the term staying the same. This puts pressure on your client to accept your discount and resolve the issue quickly.

This strategy is best suited for when you need the invoice paid now, cash-in-hand, and are OK with potentially taking a hit to the client relationship. While offering a discount can be viewed as compassionate, the pressure generated from enforcing the payment terms can rub some clients the wrong way.

Here is an example response email: 

Hi there, 

Gosh, I’m sorry to hear that. I’ve enjoyed working with you. I’m willing to discount the invoice by 20% to accommodate your situation if you are able to pay the invoice by [date]. I hope this provides some relief while still ensuring I can make ends meet on my side too.

Please let me know by the end of this week if this plan is acceptable, and I will re-invoice. 

Thank you. 

3. Be flexible on both price and terms.

This strategy is a combination of both 1 and 2, offering a discount along with flexible terms. This option is the best and most accommodating you can offer a client. This option is best suited for when you really don’t need the full invoice paid, and you want to ensure this client feels a great sense of accommodation and compassion from you. This can lead to deep gratitude from your client and benefit your long-term relationship.

Here is an example response email: 

Hi there, 

I completely understand. I know the current business climate is hard for everyone. I’ve really enjoyed working with you and I’m willing to negotiate on this invoice to keep our relationship going in the future. I’d like to offer you a $500 discount and extend my payment terms to net 90 days. I hope you find this generous while still honoring the work I’ve done.

Please let me know by the end of this week what you think and I would be happy to re-invoice. 

Thanks. 

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4: Stick to your original invoice.

Don’t forget, you and your client agreed to scope of work, signed a contract, you provided services, and now it’s time for them to pay. This is how it should work. It’s perfectly reasonable for you to hold firm on the original agreement. 

Now before you choose this strategy know that this might be the toughest option. It will have the most conflict. It may take the most time. And the outcome is still unknown. But, you are entitled to what you are owed.

It’s difficult to know how this option relates to your short-term cash needs. On one hand, the client could respond and pay immediately. On the other hand, they could never pay [and you may need to seek some type of collection service]. This option will have the biggest negative impact on your client relationship. It’s not impossible to come back from, but the conflict most often leads to a long-term divide in the working relationship. 

Now, you can be compassionate and understanding while still being firm and holding your ground. Here is an example response email: 

Hi there, 

I’m sorry to hear about your current situation. Times are hard for everyone right now. Unfortunately, I must insist that you honor the original agreement and invoice. The current amount of [amount due] was due on [date]. 

Please let me know by the end of this week if you plan to uphold our agreement. Otherwise I will have to take additional action.

Sincerely,

In the end, navigating this situation can be tricky. What's important is you now know the options available to you. It's up to you on how to move forward. There is no right or wrong answer. You shouldn't feel bad about your decision on how to proceed. Simply do your best to be kind and honest and trust that your client will do the same. Good luck!