Dear Dakota Series | What to Do When an Interior Design Client Won’t Pay
Dear Dakota,
What should I do when an interior design client won’t pay?
MY RESPONSE:
As if you don’t have enough challenges on your plate, now you get to be a collections agency, too? BLEH!
Before I share what to do and ways to handle it, I want to look into why it might be happening and how to prevent it from ever happening in the first place. Building a strong business foundation and setting expectations from day one are KEY to avoiding tough situations.
Let’s first take a few steps back and look at why your clients may not be paying you. Also, my response is based on an assumption that the client has already signed a contract and paid an initial fee (if they haven’t, then they aren’t a client, and this post doesn’t apply to that situation).
The client forgot their invoice was due
You forgot to invoice the client
The client is unhappy with your work
The project came in way over what you estimated, and they are pi$$ed
The client ran out of money
The client is a complete maniac
01 | The Client Forgot Their Invoice is Due
Your clients are busy, and most likely, when you emailed the invoice, they marked it as unread so they could come back and pay it later. But then they forget. Simple as that. Be sure to send reminders as a courtesy to your client. And, if you use software that lets you view the activity on the invoice, you’ll be able to see if your client has even opened or viewed the invoice. Woo hoo. Sometimes, invoices land in spam!
02 | You Forgot to Invoice the Client
Oops! Happens to the best of us and isn’t your client’s fault. If it turns out you forgot to invoice the client, obviously, you’ll want to cut them some slack and send the invoice to them with a possible extension on the due date.
Tip: I love Honeybook* for my client invoicing, and when we collect installments, I can set a payment schedule by the client, and it will automatically email the invoice in advance of the due date. No brain power from me is required.
03 | The Client is Unhappy With Your Work
OUCH! Burn. So, this shouldn’t happen because you screened the client, sent a detailed scope of work and estimate for their project, did a thorough job in the research phase getting to know them and understanding their style, and provided them with a revisions period to make any adjustments to the design.
Yet — they’re still unhappy. If you didn’t deliver what was included in your scope of work and you agree you missed the mark on the design, then you should work with the client to come to a resolution. If they are completely unrealistic and keep changing their mind, this would be a great time to part ways and cut your losses.
Tip: Watch for prospects who show up to the discovery call disgruntled, unhappy, hard to please, or with difficult energy. You won’t be the one to “prove them wrong.”
04 | The Project Came in Way Over What You Estimated, and The Client is Pi$$ed
Once again — this one is on you. Your client is coming to YOU for your expert guidance. They have no idea how much things cost (heck, I know a lot of designers even struggle to know how much things will cost, and they do this daily).
If you presented an estimate for furnishings or hours, and now you’re coming in WAY over, of course, your client might be frustrated and might withhold payment. It is your responsibility to help them set a realistic budget, stick to the budget, and keep them in the loop if you’re approaching the estimated hours or selecting something that will push them over budget.
05 | The Client Ran Out of Money
We see this a lot when the market changes: clients press pause on projects, clients not moving forward with ordering, and clients taking on some of the work themselves.
If your client has gone through a financial upset that isn’t related to point #04 above (you going way over budget) and they owe you for work completed, they still owe you. The payment plan timeline may just need to be adjusted.
Now, let’s look at some ways you can prevent non-payment from ever happening in the first place.
01 | Your Contract + Welcome Guide Should Detail Your Payment Policies
Your contract should clearly outline your payment terms and schedule. Then you should also follow that schedule, sending your client their invoices in advance of due dates. Always have an attorney in your state review your contract.
They should know from the very beginning what’s included and what’s not, how and when you will be billing, when payments are due, what happens if they are late, how they can pay, when furniture invoices are due, if furniture sales are final or if they can be returned, what fees are coming their way in addition to design fees, product fees, management fees, etc. Tip: If you need help with this, be sure to check our Sample Scope and Service Agreement for Interior Designers.
Also, don’t tie payments to “client satisfaction.”
PS: I’m not an attorney, and this is not legal advice.
02 | You Should Collect Payment in Advance
If you’re billing hourly, collect a portion of the estimated hours upfront and apply them to the final invoice. This way, if they are late in paying, you can always draw from that initial installment. If you’re billing flat fee, collect everything in full before you present. If they don’t trust you to keep working on their project after the fee is paid in full, then they shouldn’t hire you. It’s that simple.
And oh no, you didn’t collect the balance of furniture due when it shipped or when it was installed. Why…why….why are you adding logistical accounting madness to your plate?
Learn the ins and outs of selling and pricing wholesale furniture to your clients here.
03 | Keep Communication Open + Be Transparent
And not like this: “I mark up my products 20% over my cost”. NO. Or,”I split the discount", or “I make a 20% commission on any services booked through me.”
NOOOOOOOO.
NEVER use the words mark up, discount, or commission with clients.
Be transparent and let them know if you’re coming up on the hours you had originally estimated for their project BEFORE you hit the number. Is it because of them? Is it because of you?
Let them know if something you selected is outside the budget range and get their approval before incorporating it into the design. If you’re presenting a room that is over budget, present some in-budget alternates (not a whole new design plan) so they can choose to go over the initially established budget or stay within that budget.
At every touchpoint, let them know what’s coming next - not only what they can expect from you but also what you expect from them.
When you update your client on the status of their project, always let them know if they have any invoices coming due. Is their monthly design fee invoice due next week? Do they have a design fee installment coming due in 10 days? Should they prepare to write a check on presentation day? You get the idea.
And PS: If someone asks you what your markup is, think about this: Would you tell them what you markup your team? Probably not. So why would you do it with products?
Your pricing. Your business.
04 | Let Clients Know if They Are Adding to the Scope
When clients request more scope, let them know if you can add it on and what the additional cost will be. Get approval (and payment, if possible) before adding the work to your plate. This will help to keep their project in check and help you keep their selections on budget. It can be exciting for clients to see their design come to life, but they should also be able to afford to purchase all the selections.
It makes no sense for you to keep adding to the scope if they can’t afford to purchase everything you’ve already presented.
05 | Remember You Are a Business Providing a Service
As a business owner, you have to talk about money with clients. This means it’s important for you to get comfortable discussing fees, payment dates, late fees, etc. If you stay in front of it (by following steps 1-4 above), you should be able to avoid most awkward conversations.
And if you’re not comfortable talking about money, then you need to build out your client process so every piece of marketing and information that goes out to the client does the talking for you (like our Client Experience Templates for Interior Designers or our Scope & Service Agreement for Full Service Designers.
So now, to answer the question: what do you do if a client doesn’t pay?
First, be sure to send them multiple reminders. Remind them of the payment policies and what happens when the invoice is late (pull the language straight from your contract that they signed!!).
If emailing them the invoice hasn't worked, try a different approach. Call them. Print the invoice and mail it. Or, have someone else from your team reach out to them.
While this is happening, be sure to cease all work (as outlined in your contract) and let them know you’re pausing their project since you haven’t heard from them and are unsure how to proceed.
Provide payment options to your client. People like options and often will say yes to one of them. Just like you would handle a toddler, make sure that each option is beneficial to you as well. Offer them a staggered payment plan. Throw in a discount if they pay the balance in full (or maybe you just waive the late fees). Offer to remove parts of the scope that haven’t been completed yet to reduce their design fee balance. You get the idea.
If that doesn’t work, you can hold their furniture for ransom and not schedule their installation/styling day until you are paid.
And if none of that works, you can have your attorney draft a letter.
BUT, I’ve found that if something goes to an attorney, it’s usually not going to end well and could tarnish YOUR reputation (I know, rude, right?). There are times with some clients when it’s best to just cut your losses and know when to walk away. Do everything you can on your end to be professional and supportive while continually referencing the terms of the contract your client signed. I always think, “What if a client screen-shotted my email response and posted it online?”.
And, if you’re struggling with client management issues, our Emerson Client Experience email templates now include emails for tough client situations just like this. Check them out here.
Additional tips for handling clients whose invoices are past due:
Get your contract signed.
Listen to your gut.
Avoid bad clients from the start. Signs to watch for: the promise of a bigger project later down the road, their only questions during the discovery call are about your “discounts”, and they ask you to move outside your established process. Read more about why your trade price isn’t a discount here.
Collect 50% upfront, 50% before design presentation. Or, collect a design fee upfront to be applied to the final invoice. And obviously, furnishings are paid in full prior to order placement.
Have a clearly defined scope, payment schedule, and payment policies.
Don't leave payment until the end.
Don’t work for free.
Want more tips like this? Be sure to join my Friday morning newsletter, The Weekly Install®, just for interior designers. It goes great with coffee…..or mimosas.
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