Q: What are your options when a client doesn’t pay on time? And if the relationship worsens, what is the best way to fire a client?

Cami Zimmer, president & managing director Campaign Touch

 

A: You can avoid firing clients by being as proactive as possible. Determining the clients that you want to work with is an important part of the selling process, and the seller must do the due diligence. You may include company reputation and/or ability to pay as important variables that influence your client acquisition prioritization strategy.

Your business could be targeting start-up companies, which may be strapped for cash and unable to pay you in a traditional manner. Creative arrangements such as installment plans, gaining an equity stake and even bartering goods or services may be viable options, but this should be negotiated upfront.

The best way to avoid a company wrongfully not compensating you for services rendered is agreeing on a clear and detailed payment plan before any services are rendered. Upfront payments will minimize risk and subsequent payments should be scheduled around major milestones of the project to ensure that nonpayment signals are identified before too much investment is made by your company.

If disagreements exist at a milestone, the decisionmakers from each organization must talk. This issue can escalate if it is managed via e-mail or letter, or by delegates who lack authority. Be sure to summarize the agreements made in writing and ask for confirmation of that agreement.

If an agreement cannot be reached at a milestone, the parties should professionally manage the situation and discontinue the relationship. If your client is violating the terms outlined in the agreement, it is your client severing the relationship, and not you firing your client.

If you did not structure the agreement as described above and you are owed a significant amount, you may be able to recoup your loss in court.

Most important, maintain a positive tone throughout this process. Being known as a company that is difficult to do business with or is not reputable could be the most damaging result of this circumstance.

 

Avinash Malshe and Stephen Vuolo are professors of marketing at the University of St. Thomas Opus College of Business.