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A Creators' Guide to Handling Unpaid Invoices

Unpaid invoices are a nightmare in the creative space. Not only does it disrupts cash flow, but they also leave you doubting yourself. So here's how to handle unpaid invoices like a pro.

When it comes to getting paid as a creator, that old saying, 'Hope for the best but prepare for the worst,' is good advice. While the creator economy is a billion-dollar industry, a study found that 87% of creators still don't get paid on time, get paid the wrong amount, or not at all.

Until you have had to chase payments as a creator, you never will understand the menace of unpaid invoices. Irrespective of the size of your business, unpaid invoices aren't just a mess, they leave you doubting your ability and worth as a creator.

About a year ago, an Australian sex toy company, Ohh! Companion was publicly denounced by several Instagram influencers who were owed thousands of dollars months after their campaigns, proving that the creative space is not always a bed of roses.

We understand that chasing unpaid invoices is a nightmare, especially for inexperienced creators, so we've prepared this guide to help you collect an unpaid invoice without burning bridges.

1. A Gentle Reminder

Sometimes, a gentle reminder is all it takes to collect an unpaid invoice. It's possible that your previous invoice slipped through the cracks. After all, your clients are humans with tons of commitments and distractions.

In other words, the late payment could be an honest mistake, and sending that first follow-up might be all it takes for your clients to pay you. Don't jump to conclusions and start mailing your client nasty or threatening emails.

It would be extremely embarrassing to lose your temper only to find out that the client was out of town or dealing with an emergency. So before you get angry, send a polite follow-up mail to check-in.

If you're working with a large company that needs more time to process payments, set a due date within a week or two. If the time elapsed and you weren't paid, it's time to move to step 2.

2. Abandon The Stiff Approach

What if the gentle reminder didn't work? Sometimes you have to be very firm in following up on unpaid invoices, and that is abandoning the stiff business approach and instead writing one email that's carefully worded to express how you feel.

Here's an email Andy Clarke composed:

A quick note to say that I am really disappointed that you have still not paid me the [..] that I'm owed for the work I did for you. In the grand scheme of things, it's not a lot of money, but actually I think that this is more a matter of respect.

I have always been there at the drop of a hat to sort out any problems you might have. I love working with you and have always taken our relationship as more than just client/supplier. But if I can't rely on you paying promptly or it takes several attempts and reminders to get my money, that's not good business.

I'm not saying that I don't want to work with you, I do. But if I don't receive what I am owed within the next couple of days, I will have to think twice about helping you in the future.

Kind regards

Andy Clarke

According to Andy, this is the most effective debt-collecting email he has ever sent, with every client paying him within two days. However, if you're using this approach, note that you might end up never working with the person or brand in the future.

And who wants to work with a client that takes forever to pay? If you finally get paid after numerous back-and-forth, the best you can do is cut off future collaborations depending on the provisions of your contract.

3. Send A Statutory Demand

After a few follow-ups and yet no response from the client, it's time to escalate things a little bit by issuing a statutory demand.

A statutory demand is a formal warning from the vendor to the client to pay the accounts payable on time. Note that this does not count as legal action, but it is enough to encourage your client to pay you.

You might need to consider calling your lawyer to create it, or you can make it yourself with the help of online templates. Then, if the client still refuses to pay the outstanding amount even after receiving the demand, you can proceed with insolvency proceedings against the defaulter.

4. Hire A Collection Agency

When an unpaid invoice crosses the 60 days mark, then it's time to bring in a 3rd party, and a debt collection agency might be the ideal solution. These are professional debt collectors who follow legal means to ensure your clients pay you.

However, you will need to provide the following to the collection agents:

  • Copy of the signed contract
  • Product/services delivery proof
  • Copy of the unpaid invoice
  • Communication in the form of emails or texts between both parties

As you rightly guessed, debt collectors will charge you a fee. So it's crucial to assess whether the unpaid invoice is worth hiring a debt collection agency. As a rule of thumb, research the right collections agency, and ensure you're hiring the right person who is aware of the legal obligations.

5. Go To Court

When all options fail, then it's time to bring out the big guns. But before you take this step, ensure the amount is worth the hassle, so you don't end up on the losing end. Although you can go to court yourself, calling your lawyer would be advisable since your lawyer is a professional who understands the nitty-gritty of the legal system.

Your lawyer could charge a flat fee or percentage based on what you're owed, depending on the initial agreement. When you take your client to court, you are establishing a reputation that not paying you is not an option, which is good for business.

If the amount you're owed exceeds the small claims court maximum limit, you will have to consider a regular court to file a lawsuit. But, again, ensure you work with a professional lawyer for guidance.

Avoiding The Hassles Of An Unpaid Invoice

If you want to get paid instantly after collaborating with a client, it is best to work with a contract and research new clients to ensure they are reliable and don't have prior complaints.

If everything checks out, keep detailed records, and don't be shy to ask for payment upfront. To make it easier to get paid, make the payment process as convenient as possible, and work on establishing a solid client relationship.

That is why most creators love using Gigapay to get paid after a collaboration, with taxes and social benefits declared. So feel free to book a demo, and we'll show you how it works.

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