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Dealing with a potentially "not paying" client

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Andrei-Cristian MurgescuDealing with a potentially "not paying" client
by on Apr 2, 2010 at 12:39:21 pm

Hello

To keep it short, I'm about to finish a motion graphics project for an American client and I have a vague feeling in my guts that I might not get paid.
This is our first collaboration and until know things went smooth. He asked for an invoice for the advance payment, however (allegedly due to the accounting department) the payment has not yet been made, and as we're nearing the end of the job, it's already too late for an "advance payment" anyway. Their accounting dep. sent along a contract and a W-9 form, I told the guy to tell the guys in accounting that as I foreigner I might need to complete form W-8, etc. etc.
Now, I don't know if they're really up to something or if my paranoia has kicked in too much.
The question is, how do I deal with this particular case. How do I protect myself without offending my client in the case I'm wrong and just paranoid?
I'm asking this here because I know there are lots of Americans here and you guys know better how to politely tackle this kind of issues. I'm an European and some approaches may be different.
Like I said, I have no solid reason to believe that I'll be ripped off, aside from the delayed advance payment and that feeling in my gut (feeling substantiated by previous experiences). Apart from that everything went smooth and I would really like to keep a good relationship in the future with this client provided it's just my paranoia kicking in now).
Any thought on this would be highly appreciated.

Thanks guys!


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Craig SeemanRe: Dealing with a potentially "not paying" client
by on Apr 2, 2010 at 1:38:49 pm

Have you been paid anything yet?

At some point during the project you should have received a partial payment unless the duration it took was so short that would have been difficult.

Watermark the master (Time code burn in for example or other logo making it unusable but still viewable) and do not give them a clean copy until paid.

Generally I wouldn't consider that as a sole means of getting paid because you can end up doing "spec" work in which you don't get paid if they decide they don't like what you've done.

Also when they see the watermarked version if they ask for revisions, politely tell them that you need to get paid for the service rendered so far before doing revisions.

Basically they should get nothing usable even if it's a "rough" that they can extract elements from without payment.

It's certainly possible that they are facing an internal bureaucracy so the above actions really shouldn't generate any malice because you are showing that you are performing the work even though you haven't been paid.

In this circumstance I wouldn't accept invoicing because it would be difficult for you to pursue collection. There no reason why the can't pay whether wire transfer or international money order with expedited shipping for final delivery.



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Andrei-Cristian MurgescuRe: Dealing with a potentially "not paying" client
by on Apr 2, 2010 at 1:51:05 pm

Thanks Craig.

No, at this time I haven't received any payment yet. The client agreed on a 20% advance payment, they asked for an invoice, I sent them one, and then last week they asked for other documents as well (they asked me to sing a contract, and to fill in the W-9 form as I said). The entire job took about a month, and I sent them the invoice by the end of the first week on the job. First time I asked about the advance payment, they said I'd have to wait until the end of the month. That has just passed and I have no word on said payment. Two days ago I asked for an update on this and, while I received a reply concerning other matters of the job, the client gave me no answer to my payment question. That being said I'd start looking like a fool repeating the same question over and over again. Now, perhaps they're still working on it and they thought answering my question with the same "wait until we sort this up" would be redundant, or who knows what reason they might have. They are a relatively important company I thing and the show I'm working on is a co-production with a VERY big company. This is why I don't think they'd risk any scandal on the matter.
Again, I have no substantial evidence, it's just something in the back of my head bugging me all day long. It very well may be the after effect of previous bad experiences with other clients and, like I said I wouldn't want to let that spoil my relation with this client.

Again, thanks for your suggestions.


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Craig SeemanRe: Dealing with a potentially "not paying" client
by on Apr 2, 2010 at 2:17:06 pm

[Andrei-Cristian Murgescu] "The entire job took about a month, and I sent them the invoice by the end of the first week on the job. First time I asked about the advance payment, they said I'd have to wait until the end of the month. That has just passed and I have no word on said payment. "

Most businesses can deal with net 30. If they don't pay anything at that point I might show them a watermarked version on the web, not easily downloadable.

[Andrei-Cristian Murgescu] " Two days ago I asked for an update on this and, while I received a reply concerning other matters of the job, the client gave me no answer to my payment question."

At that point I'd cease all work. Show the watermarked version and tell them you need payment for further revisions. At this point, given the time passed, I would ask for significantly more than 20% as the job is nearly complete. I'd ask for 70% and no further work is done until that money is "in hand" and cleared by your bank. It's up to them how urgently they need the job. I would hold this position without compromise.

Personally I'd never work 30 days without payment.

I once did something similar for a very big company as well. 6 months after the project was done I'd had enough and told them I was going to the office to collect payment. The problem is you can't do that in your situation. BTW when I arrived the lobby was empty, the receptionist was gone, a security guard handed me the check.

Big companies can certainly be slow pay but they're usually quite honest about that up front. I've worked for a few other slow pay companies but they're always straight forward about that whether net 30 or even net 90. That's key to knowing whether the company is honest about their internal bureaucracy, accounting practices, etc.

[Andrei-Cristian Murgescu] " thing and the show I'm working on is a co-production with a VERY big company. This is why I don't think they'd risk any scandal on the matter. "

And that may be the very reason they chose "over seas" talent. There's no scandal if it is difficult to avail yourself of the local legal system to collect.

BTW I used to on staff at a facility that had an extremely big client. They tied up half of a very large facility for years. They were progressively slower in their payments finally stretching over 6 months behind. Not very good for a facility in which they were likely over half the gross revenue. Every time the facility made efforts to collect (which was really just speed payment to more like 90 days or so) the big company threatened to go elsewhere. The facility went bankrupt . . . and the bulk of the employees lost thousands of dollars in back pay.

If a big company isn't upfront about their pay schedule they can be just as unreliable and untrustworthy and are very good about shielding themselves from scandal.

Your job, ABOVE ALL ELSE, is to keep YOUR BUSINESS IN BUSINESS.


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Nick GriffinRe: Dealing with a potentially "not paying" client
by on Apr 2, 2010 at 3:16:26 pm

Andrei-Cristian -

While I agree fully with Craig's suggestions, let me add a few thoughts.

Rather than simply refuse to go any further you need to go to your primary contact and build sympathy and solicit active support. For starters, try blaming your paranoia on a past bad experience. Cite how once before you let something get out of hand with the result being that you didn't get paid and that you simply can't afford to let something like this develop again. Stress how honored you are to be on this project, but, like anybody else, you simply need to be paid. Explain that you will soon need to move on to other jobs because you can't pay your bills without the expected cash flow.

Then here's the key part of handling this situation: make it your contact's problem. Having stated that you simply can't continue without money say something along the lines of "What should we do now?" or "How can you help me solve this problem?" If your primary contact needs the work, and sees not having it as delaying the whole project, he or she should make it their business to get this resolved quickly.

I'm sad to say that far too many big businesses and especially certain big ad agencies have developed the philosophy that delaying payment to vendors is an easy source of cash "float." But that said, they can almost always find ways to get select people paid in a timely manner. Usually. Sometimes.


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Andrei-Cristian MurgescuRe: Dealing with a potentially "not paying" client
by on Apr 2, 2010 at 3:31:30 pm

@Nick and Craig

Thanks a lot for your advices. Some of them are very much along of what I had in mind, but like I said, being somewhat of an ignorant on dealing with American businesses it helps to know if I am on the right track.
I will keep you posted in my progress with my client.

Kind regards,
Andrei


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Mark SuszkoRe: Dealing with a potentially "not paying" client
by on Apr 3, 2010 at 9:35:35 pm

Craig is right on here.

I add that despite what they may tell you, every large organization has a line item or some account somewhere for emergency funds, to be used for immediate and urgent stuff. Like, say, the bathrooms one floor above their main server room are leaking gallons per minute, it is off-hours, and the plumber insists on payment up front. The company is not going to wait until Monday to get the leak stopped and buy a new server room. Some kind of check will be cut. That day.

Now your invoice is not as urgent as that scenario, but you never know; the product you're working on may need to be seen at a key time by a key boss, or many heads will roll. So don't blink when they cry that they can't pay you NOW, but it absolutely MUST be delivered complete by so-and-so date. That's almost always a lie. They just don't want to have to explain to some VP or CEO that he has to sign an emergency check, because his underlings fumbled the ball somewhere. They may threaten you, they may say they'll have you blackballed. Tell them you'd be glad to make their financial difficulties more public and hash this disagreement out in the open air if that's the case, but you didn't fall off the turnip truck just yesterday and you will be paid. Today.

And what IF they DO pull their future business from you? Is that *really* much of a threat when you think about it? How does not getting paid *again* for doing even more work act as any kind of positve incentive to you?

No, you have to be willing to walk away, and they have to BELIEVE that you could, if you want to negotiate on a level playing field. Surrender early, and you are their slave ever after.

Maybe things will work out and this really is just a case of bureaucracy and not policy. It is possible, so you are right to play it light and diplomatic at first. What will quickly clarify the situation though is when they demand an unwatermarked final copy and you say "no, where's my check first".

Character is who you are in the dark.



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Andrei-Cristian MurgescuRe: Dealing with a potentially "not paying" client
by on Apr 3, 2010 at 10:23:07 pm

Hey Mark, thanks a million, I had quite a laugh reading your post AND you're right. This is the usual way I am dealing with the clients in my country. However somehow I sometimes lure myself into thinking that humans in different countries are different. Probably not. Anyway, today I sent out a watermarked preview version of the final piece, I will expect their reaction soon enough.
Like I said, I don't want to risk scaring them away. Yesterday I wrote them a very to the point mail but also in very polite terms so they really cannot have any negative comments on my attitude.
Again, thanks for your support! If something new comes up, I'll let you know.



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Paul ThurstonGetting paid
by on Apr 4, 2010 at 1:56:34 am

Perhaps I can be of assistance here.

The I-9 form is used when a person INSIDE the United States of America performs work. This form lets the US Government know, should there be an audit, if YOU (the one that did the work) paid your taxes to the USA Government and if you were legally hired to work INSIDE the USA.

Since you are probably not a USA citizen, you probably live OUTSIDE the USA, and the work you did was more than likely done OUTSIDE the United States of America, the use of form I-9 is not necessary or required. See this: http://tinyurl.com/y4mhry

The contract you signed probably spelled out when you get paid. If not, it should have.

Did you sign this contract as a Loan Out Corporation (meaning you are legally setup as a business in Romania and your Company is the one that "signed" the Contract) or did you sign this contract as a non-corporate person "natural person, not a legal entity" person who is doing work for hire?

IF you signed the work contract as a "natural person," then you are just an international consultant doing work for a USA Company. This means your taxes are due in Romania and not in the USA (form I-9 is not required.) If you signed the work contract as a Legal entity (Loan Out Corporation) then you are a Romanian Company doing work in Romania and all is required, ONCE you get paid is a local bill of sale.

Having said all this, perhaps the Accountant of the USA Company thinks you live in the USA and therefore needs clarification as to your status... are you an employee (with FICA deducted), are you just a Loan Out Corporation, or are you just a person doing a service but not an employee? All three suppositions are wrong as again, probably, YOU ARE NOT LIVING INSIDE THE USA, ARE NOT A US CITIZEN, and the work was done outside the USA. You may want to ask them why an I-9 form is required or expected.

To change the subject, normally you would charge 50% or more upfront once an international contract is signed. "Some people" ask between 80-100% percent upfront and that is acceptable too.

In the future, you may want to reconsider payment terms, in writing, before doing any more work for them. Marking your video sequences is an excellent way to help them understand the work is just about done and payment is expected real soon. Talking to the person that hired you also helps speed things up. By no means hand out your unmarked work without payment in full.



-----------------------------------------------
Paul Thurston
Producer
Chile


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Andrei-Cristian MurgescuRe: Getting paid
by on Apr 4, 2010 at 7:34:57 am

Hey Paul,

Thanks, you handed me a ton of valuable info.

I signed the contract as an individual not as a company i.e. as a person that's doing work for hire.

"To change the subject, normally you would charge 50% or more upfront once an international contract is signed. "Some people" ask between 80-100% percent upfront and that is acceptable too. "

Good to know, like I said, with this being my first American client I didn't know exactly ho to deal with him, all this info helps me clear my head a bit.

Again, I very much appreciate your post, besides being useful it also feels good to see people ralying to give a hand.


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