Running your own contracting business has plenty of perks, but it is not without difficulties. Getting paid as a contractor can be one of the biggest challenges, especially when you have to chase after the client to get them to pay you. In many cases, there is no ill will involved--it's just a matter of bumping yourself up on their priority list. Occasionally, though, you might encounter a difficult client who flat-out refuses to pay. Knowing how to get paid as a contractor when your clients are slow or reluctant is an important skill.
In this post, we'll discuss some of the reasons a client might refuse to pay you and give you some tips, both for handling that situation and for making sure it never happens again.
When a Client Refuses to Pay a Contractor
So why would a client refuse to pay you? The possible reasons range from innocent misunderstandings to human error, all the way to fraud and malicious intent.
The most common reason is that the client is unsatisfied with the work itself. Maybe they think you did a shoddy job, or maybe there was a miscommunication that led them to expect different results. There also might be issues with the contract that cause a client to withhold payment. This is also related to unmet expectations, because the contract lays out exactly what the client and contractor expect of each other, and if it isn't stated clearly, it can cause misunderstandings.
Fraud is also a possibility. You might have done everything right and the client is just trying to get a free ride, therefore knowing your fundamental contractor legal rights and laws is absolutely critical.
What to Do If a Client Refuses to Pay You
When a client refuses to pay contractors they've hired, that means that they are unhappy, and it's important for you to understand exactly why. So the first thing you should do is listen. A face-to-face conversation is the best way to go, because your communication will be more effective than it would be over the phone or in writing. Ask your client to explain exactly what went wrong. Don't argue and don't justify yourself while they're speaking. Just listen.
Once you've listened, repeat back what the client has said in your own words. This is the most effective way to let them know that you have understood what they told you. "So, you feel that my work did not live up to your expectations." "You felt I should have been more careful about covering your furniture before I began painting." "You believe the materials I used weren't good quality."
Hopefully, this will smooth the way to the next step:
Try to Find a Peaceful Solution
When a homeowner refuses to pay contractors who have been building or renovating their own home, they usually don't want to have to go through the trouble of hiring someone else. They're withholding payment as leverage to get you to fix the problem.
Dedicating more time and materials to fix or redo the work may cost you in the short term. Think of it as an investment in your business's reputation. Most customers are happy to give you a chance to set things right, especially if you've established a good relationship from the beginning.
Sometimes it won't be possible to redo the work, and in that case you can offer a discount on the amount they owe you. Discuss the possibilities with the client and see if you can come up with a creative solution.
When push comes to shove, though, you deserve to be paid for work you did, regardless of how the client feels about it. If your efforts to find a peaceful solution come up dry, it may be time to take legal action.
Can a Contractor Sue for Non-Payment?
The short answer is yes. If you've exhausted all other means, you can bring the case to a small claims court. It's a good idea to speak to a lawyer first to see what your options are and whether it's worth it.
Can a Contractor Sue for Non-Payment Without a Contract?
According to Ask-a-Lawyer.com, oral agreement is enforceable in court. That means that you don't necessarily have to have a signed contract to make a non-payment claim--but it's strongly advisable to have something in writing. A solid written contract outlines all the details both parties agreed to. Without a written agreement, it'll be your word versus theirs. In most cases, unless there is an obvious problem with the quality of the work, a court will rule in favor of an independent contractor not paid for work. Still, other situations may be fuzzier and inconclusive. It's always a good idea to have a contract.
How to Prevent Issues with Getting Paid as a Contractor
Choose Your Clients Wisely
Keep your eyes and ears open in your interactions with a potential client. If something doesn't look right or doesn't feel right to you, consider backing out. In most cases, it's better to lose a potential job than to risk working with a client you can't trust.
Get It In Writing
As mentioned above, the best way to prevent problems is to put the understanding between you and your client in writing. Ideally, you should ask a lawyer to review the contract and point out any problems with it. A solid contract can prevent major headaches later on.
Get a Deposit
It's common to ask for a percentage of the overall fee up front as a nonrefundable deposit. This way, at least you'll receive some compensation for your time and labor if the client backs out. The size of the deposit depends on your industry and can range from 10-50%.
Other Considerations to Ensure Smooth Business Operation
Non-payment is not the only problem you might encounter as an independent contractor. Purchasing insurance from a company that understands your industry and provides tailored insurance for contractors can give your business the protection it needs to continue operating smoothly.
For more information on how insurance can help protect your business, check out our Contractors Insurance page.