The information contained in this article should not be relied upon as legal, business, or tax advice. We encourage you to seek guidance from your legal counsel, business or tax specialist with regard to how the information contained in this article may or may not apply specifically to your business.
While a missed payment from a client can be frustrating, it’s important to maintain your professionalism, give clients the benefit of the doubt and recognise that human error or valid concerns may arise that could prevent a client from paying on time. Still, specific situations can arise with interior design clients that you can look out for to help prevent payment issues ahead of time.
To start, there are several ways you can prevent missed or late payments ahead of time, including setting up contracts with fee structures and creating impeccable invoice templates to use in your business. We’ll also get into what to do if you need to escalate a non-payment situation with a client, such as when a dissatisfied client refuses to pay altogether and when to take legal action, if needed. Click on a link below to jump straight to the section you're interested in:
What to do if an interior design client misses a payment
When a client misses a payment, it’s best not to jump to conclusions or take more extreme measures right away. You need to keep in mind that, in some cases, there may be an understandable reason for a late payment, so you don’t want to give a stern response too soon.
Here’s what to do if an interior design client doesn’t pay and how you can elevate your actions with a measured approach, depending on your unique situation:
1. Send an email reminder after the payment due date has passed
If your client has missed their payment, it’s best not to wait too long until after the payment deadline (3 to 7 business days at most), and to get in touch with a gentle, but firm reminder email regarding payment. Letting too much time lapse to respond may drag out receiving your payment in the long run.
In your first reminder email, use phrases like, “I wanted to check in with you about the invoice that was due on [insert date]…” or “I wanted to follow up on the invoice due on [insert date] to see if you had any questions…” etc., so that you’re being open to the possibility your client may have missed your email, simply forgot to pay or potentially had some questions that you can help answer. It’s very important to mention the lapsed deadline date in your email so your client is reminded of expectations.
2. Call your client to follow up after the reminder email has been sent
After a few days have passed and your client hasn’t responded to your email, you can follow up with a phone call. We are all inundated with email these days and, as we all know, emails can sometimes go to spam or be overlooked in the inbox. A phone call can help give that personal touch and offers a second method of communication to reach your client. In your call or voicemail, politely ask if they’ve received the invoice and your reminder email regarding payment, mention the date that payment was due and ask if they have any questions or if you can be of assistance regarding the payment process.
3. Deliver a debt collection email or letter to your client
Once you’ve sent reminder and follow up emails, and have attempted to reach your client via phone and they still haven’t submitted payment, it is now best to send a debt collection letter or email (usually 60 to 90 days after the missed payment deadline). This type of communication is more formal and includes the details of your original invoice (payment due date, payment methods accepted, etc.), as well as a new notice of a final deadline for receipt of payment and what steps you will need to take if payment is not received by that deadline. The further steps will typically include pursuing debt collection or taking legal action.
4. Work with a collection agency or factoring service
Before deciding to take your client to court or working with a lawyer, you can consider hiring a collection agency or factoring service to collect payment. Collection agencies are experts in obtaining payments from delinquent customers and clients, so you can lean on their expertise and take the burden off from endlessly reaching out to your client – for a fee, of course. Factoring service companies, on the other hand, will essentially “purchase” your client’s invoice and give you a percentage of the total up front. If cash flow is thin, this may be a good option for you, though these companies will typically take a decent portion of your payment (anywhere from 10 to 20%).
5. Issue a final demand notice
A final demand notice is your last step before taking legal action against your client and notifying that you intend to take them to court. This notice can be written by yourself or a solicitor, depending on your needs, though notices from solicitors tend to have greater impact. (We’ll cover legal options more in the next section.)
Example scenarios of what to do when an interior design client doesn’t pay
While a missed payment from a client can be frustrating, it’s important to maintain your professionalism, give clients the benefit of the doubt and recognize that human error or valid concerns may arise that could prevent a client from paying on time. Still, specific situations can arise with interior design clients that you can look out for to help prevent payment issues ahead of time:
When a client wants additional work during your project
In this scenario, you may have collected payment up front for the initial project, but your client requested change orders or decided to expand the project from what was initially agreed upon, yet has failed to pay for the extra work.
To help avoid delinquent payment, you can consider charging by the hour, which encourages your client to be mindful of changes and expansions to the project. You can also include language in your contract ahead of time about how many revisions are allowed if you’ve decided to quote for a flat fee. Being as explicit as possible in your contracts will save you time, money and a lot of trouble in the long run.
When a client changes their mind about the custom furniture/decor they requested you order from a supplier after the item arrives
If a client decides they dislike the custom furniture they ordered, and if you haven’t charged a significant percentage or the full amount up front and received payment, you could be on the hook for paying the supplier if the client decides not to pay. For custom furniture or decor, it’s best to collect 100% or as much as you can up front to help cover this potential risk.
What to do if an interior design client refuses to pay
In other cases, your client might refuse to pay or intentionally miss a payment due to extenuating circumstances. Here’s how you can be prepared to know what to do if an interior design client doesn’t pay:
- What to do when an interior design client doesn’t like your work
If your client expresses that they don’t like your final design, set up a call or meeting to better understand and address their dissatisfaction. You may need to revisit the initial vision to make sure that the finished product is in line with what was agreed upon during the proposal stage, and see where the gaps or issues may be that your client brings up. Knowing exactly what didn’t work for your client will help you resolve the situation and be better able to discuss options for negotiating a new payment plan or redesign/installation. - What to do when a client is facing financial hardships
Sometimes a client hasn’t paid simply because they can’t – they’ve either overestimated the funds they thought they had available for the project or they’ve fallen on unforeseen financial hardships for any number of reasons. We all know that life happens, but you still need to get paid. Before pursuing more serious action, see if you can work out a payment plan that will work with your client, or if there are other avenues available (such as your client obtaining a personal or home improvement loan) that can help remedy the situation.
For the above scenarios, it’s important that you cease working on the project (besides communicating or meeting with your client) until the payment issues have been resolved. And if these measures fail, you may need to pursue legal action to obtain payment for your design services. Here are a couple options to consider:
- File a small claims lawsuit:
You can take your case to small claims court, either on your own or with your lawyer present, to recoup payment. While it can be time-consuming to represent yourself and present your case, this can also save you money if you feel you have a high likelihood of winning and want to avoid hiring (and paying) a lawyer. - Work with a lawyer:
If your payment owed exceeds the small claims lawsuit maximum or you’d prefer working with a qualified expert, then hiring a lawyer may be the right move for you. Look for lawyers specialising in small business law or commercial debt collection, and be sure to weigh the legal fees you’ll need to pay against the potential settlement payment you can obtain to see if the cost of working with a lawyer is worth it.
How interior designers can prevent missed or late payments
When you find yourself wondering what to do if an interior design client doesn’t pay an invoice, you may want to reconsider your approach to billing and invoicing to help avoid this situation in the first place. Here are a few key strategies:
- Set up fee structures for your interior design business:
When you create your initial client contract, you’ll want to make sure you include your fee structure. Your fee structure can change from project to project, or you may have fixed fees for certain areas of your work and hourly fees for others. You’ll also want to make sure that your fees are clearly itemised and detailed on your invoice so everything is crystal clear for your client. - Document fees in your written service agreement:
Whether you provide a service agreement or contract for your clients, you need to include details in written form about your fees and the required payment schedule. Never start working on a project unless your client has reviewed, signed and dated a document of some kind where your fees and payment information are stated. Protecting yourself in writing is always essential. - Outline expectations ahead of time:
Make sure to include payment due dates, “net 30” or “net 60” terms in your invoice (meaning payment is due in 30 or 60 days, respectively), so that your client knows exactly when they need to pay. Late fees are a helpful way to discourage late payments and should also be included in your contracts and invoices. Typical late fees on invoices are 1-1.5% per month, but check your state law for the maximum late fee percentage you can charge per year. - Charge a retainer ahead of time and bill up front for estimated hours in the next month:
With this strategy, you’ll be able to start your project with cash in hand (your retainer) while assuring that your client pays you for your continued work ahead in the following month. This way if your client hasn’t paid for the next month’s estimated work, you won’t be left out in the cold for expenses and labour you’re owed. Of course, you’ll need to include the details of this payment structure in your client contract. Explaining this to your client verbally, too, can also help clear up any questions ahead of time.
As you’re revamping your billing and invoices, you’ll also want to make sure your client contracts are as airtight as possible. While the following does not constitute legal advice, we’ve provided some helpful items to strengthen your interior design contracts, so you can avoid non-payment issues:
- To start, an interior design contract will include a description of your project, the services being provided, the estimated completion date, responsibilities of the client, fee structure, payment terms, payment deadlines, a termination clause and areas for both you and your client to sign and date.
- Clearly state and itemise what your proposal and basic services include. Also list your additional services and the approximate costs associated with each (i.e., what your proposal and basic services do not include). Having each of these in your contract will help to be completely transparent about the services being provided (and what’s not provided) to help avoid any misunderstandings.
- Outline your change order process and payment expectations if the client wishes to change orders/and or the project scope. Mentioning that you will collect payment at the time of the change versus after the project is completed will help avoid potential late payment or non-payment issues later.
- Stipulate that payment for custom furniture/decor needs to be made up front, either in full or in an appropriate percentage for your business (so that you’re comfortably covered financially).
- Include a late fees section in the event of lapsed payments.
- Outline your policy for non-payment and the steps you will take in case this occurs. This can include working with a collection agency, pursuing legal action, etc.
Conclusion
Now you know what to do when an interior design client doesn't pay you and the steps you can take to make sure you receive the money you’re owed. You’re also empowered with smart billing, invoicing and contract strategies to help prevent this situation ahead of time.
Want to streamline your invoicing and billing process, and get paid faster? Sign up for a free trial of Houzz Pro to explore our invoicing, e-signature and client file organisation features – all of which can help you get paid on time, and with less hassle.
