Hi everyone, I have a bit of a dilemma with a bad paying client that I wanted to run past you all.
He's a sole trader, I used to do monthly bookkeeping for him and that dropped off but he suddenly needed me to do a set of annual accounts for his child tax credit benefit claim. I've done part of the work and billed him £200 for that work telling him that I need payment for my work before he can have the final figures.
He then dropped off the second load of paperwork that was missing and he told me he'd definitely pay me this month, insinuating that he won't pay before the figures as per my terms. I didn't make a comment but have proceeded to complete most of the work, there's probably another day's work to do.
I'm also paying a lady to help me with it as it has been dropped on me so I'm already out of pocket.
I will be billing him another £400 for the remaining work but I can see that he's going to want to pay this later and have his figures ASAP.
He's kind of a friend and I think he's using that to manipulate me into accepting payment later but I told him that due to him taking six months to pay me last year I needed paying up front.
Do you think I'm unreasonable demanding this or should I accept 50% now and 50% at the end of the month - though my gut feeling is I'll have to wait months for that too.
I've answered my own question here but just would feel better if others would do the same.
You seem to want to be flexible over this so looking at the scenario I think that the perfect sollution is sitting in your answer that keeps everyone, if not happy, at least not stressed at what to do.
You can explain that in order to process his books quickly you needed to pay a member of staff to help out.
Because you are freinds then if he pays the staff fee's up front and then pays the remainder after x days that would be fine.
Make sure that you plump up the staff costs by at least 10% (preferably more) so that you are getting some return.
By going down that route it is moving the issue to the client who as a small business owner should be able to empathise with cashflow associated with staff costs.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I have been so soft on clients, even the ones I know are bad payers. Just last January (31st of course) a client who hadn't paid last years bill wanted me to do his accounts and tax return. I said he would have to pay last years and this years immediately. He said he could the following week. I did the work and about 3 weeks later I got half of the previous years bill and a few weeks later the other half. I can't remember how many times I have cajoled him for this years but apparently I'll get something towards it next week, it's only £300 so it isn't like he couldn't get the money. This year I have become a lot harder on clients who mess me around and it seems to be working, maybe you just have more respect if you play hard ball? So down tools until he gives you what you want.
Shaun 10% margin? Depending on the job, I try for between 50% to 100%.
The job will already have been costed and the margin aplied to it in the full billable amount.
All that I'm suggesting is using staff costs as emotional leverage and squeezing the actual costs up a little so that there is some element of one's own fee's reflected in the initial payment as well as not making a loss on the staff cashflow.
Personally my problem (so far) isn't getting money out of clients. It's getting their paperwork as there seems to be this common held belief that the accountant can magic the figures from nowhere once you employ their services, and the mere act of taking on a financial professional absolves you from all further gathering of paperwork.
If it was just one then I would dump them but this seems, at least for me, to be a common fault with clients.
Not going to say what my own actual profit margin is that I factor into my quotes as there may be clients reading this (and if you are, you're all getting a bargain... So give me your paperwork).
All the best,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I have been too soft with clients too, Rob, and you seem to get better thought of when you stick to your guns but it isn't easy I know.
I've been stung by a few in the past too where they've promised to settle up and then found some argument not to so I've ended up cutting my losses and disengaging them as a client.
I've sent my final bill to this guy and told him my terms are payment before I hand over the figures due to having to employ help to get the work done due to it being short notice and a full 12 month's worth of accounts. I've told him that these need to be done monthly or quarterly from now on and a standing order will be arranged with payment in advance. If he doesn't like it he can ask someone else to do the books for him, I've got plenty of good clients who pay spot on time so I don't particularly need his business if he can't play ball.
I agree with you, Shaun, there are so many clients who just don't realise how much work is involved and that we can't just magic the figures out of thin air, that is very frustrating.
I think it's very unfair that he's presuming I'll give him months of credit when I see all the bills he puts through his books are paid upfront and they are large companies that could afford to offer credit, I certainly can't and why should we at the end of the day.
Your idea of negotiating payment for the wages plus my margin is a good one, Shaun, I think I'm going to set e standard with him now otherwise I'll be forever chasing him for money owed and I'm established enough to not need clients like this, thankfully.
I've been in a similar position too. Now for self assessment or VAT returns they are not filed until paid. I now try to get everyone to pay by direct debit so that the year is paid before I do much of the work. If not I normally get half up front and the remainder before anything is filed.
My only point is that if he's a friend, he wont treat you like this. Give him nothing until you've been paid and do no further work.
Avoid the problem by getting clients to pay monthly by SO or DD in advance so your fee has been paid by their year end. (and you will be paid some of the next years fee before you even do the first years work.) This is how I work with about 90% of my clients and not had any problems.
Currently I work with SO which is a bit of a bother where you need to change the monthly amount due to fee increases/changes in work to be done as you need to get the client to do it at their end. To avoid this I am switching over to DD via GoCardless in the next couple of months so I can change monthly amounts at my end.
I have some that pay annually but they all know that they wont get their accounts/tax return filed until they pay. Once you have filed their return the incentive for them to pay is reduced so why would they pay you if they have no incentive.
Also introduced a 10% early books incentive this year which clients are taking up whereby if they get their books in within 3 months of the year end they get 10% off their agreed fixed fee. Equally if they hand in records more than 6 months after their year end they will have an uplift in their fee which will be enforcing.
As long as clients know the score before you start then they cant have any complaints afterwards. If someone wont play by the rules then it bye bye to them. Have a ltd company client that had for just over a year that has 6 years accounts/annual returns/VAT returns/payroll returns etc outstanding. Keeps saying will get the information in to do the accounts. Spoke to him on the phone the other day to say if he doesnt get the first year in by the end of the month will be issuing a disengagement letter and wishing him all the best. So far havent been paid anything by him for the few hours work I have done so far so no worse off if let him go.
I have taken a harder stance this year on the self assessment clients- I will do the work, prepare the assessment but not submit it until the payment is received, I know to some degree I would still lose out if they dont pay as I have already done the work but it has worked on the first dozen I have done so far this year- think its because they were subbies who wanted their refunds back!!
It will be interesting to see how quickly they pay when it comes to the stragglers in January if they want to avoid the penalties.
My bookkeeping side of things is all paid by Bacs and I normally am the one processing payments due so I have no problem getting payments from those.
I think you're spot on there, Kris, if he was a friend he wouldn't put me in such a difficult situation.
He has replied to my email this morning saying he's shocked at my invoice, bearing in mind I'd already billed him for a third of the fee almost a month ago (which works out at only £50 per month!!) and he can't understand why his books are in such a mess.
He says it will only cost him another £20 per month to go limited and ask his accountant to do his books - really???
I've told him that that's fine, he can give the accounts to his accountant, I will release his figures and the data to his Accountant once the payment is received in full and not before.
I think he's miffed that I'm not being taken in by his trying to be all pally pally, he obviously doesn't value what I do for him so I'd rather not have a bad client like this, I've done him a favour getting it all done in less than a month!
He's pleading poverty but maybe he could sell one of his horses if money is so tight and a lot of his business is done in cash so lord only knows how much he doesn't tell me about!!
All my other clients are great, they either pay within 14 days by BACS, one client pays by cheque on the dot every month and the others are set up with SO or DD so I don't have problems elsewhere.
I think it's good to weedle out these crappy clients as soon as possible as they tend to be the ones that suck all your energy and are the most demanding!!
-- Edited by Teresa2406 on Monday 12th of May 2014 01:24:27 PM
I had one of these. The first year I did his bookkeeping I dropped everything to get it done and it took him weeks and lots of reminders to pay. This year he agreed to set up a standing order but it didn't happen. Then he turned up one day and said he needed a whole year's worth doing in 2 weeks. I did it and again had problems getting him to pay. I did get the money eventually and he promised to send me paperwork monthly with a standing order to avoid me having to drop everything ot do a load of work for no money but it hasn't happened. I won't be doing anything for him in future unless he pays up front. I have lots of other clients who will pay and I'd rather prioritise them.
