When you hire someone and have them do some work for you, and then you tell them that you are very pleased with the work they did, but you don’t pay them, there are consequences.
One possible consequence is that the person won’t trust you anymore. I’m an optimist, and I’m pretty positive that’s going to happen.
Another is that you might not get good sleep for a while, because your conscience may bother you. It should bother you. If you truly cannot pay the person at the time it’s due, because something you didn’t expect came up, then communicate. Tell them that you can’t pay them right now, and why, and when they can expect payment. Or offer them your firstborn (I’m kidding), or something else of value that they might want or need.
Cash flow problems lead to business failure
A third possible consequence is that you destroy the service provider’s financial house. How could that be? No one should depend on the money that is supposed to be coming in, right?
Well, sometimes a solopreneur has to depend on the money that is supposed to be coming in—for example, when they’re not independently wealthy and actually need an income to live. Needing the money that hasn’t arrived means having a cash flow problem. Cash flow problems have brought down more businesses than any other cause. Sometimes, all it takes is a hiccup like one missing payment. The more margin a business has, of course, the better.
When a business owner is in certain stages, like starting to expand capacity to be able to bring in more money (when it’s just one person running a business, it’s not always possible to earn enough or to have time off), sometimes the provider has to hold his breath and pray that nothing goes wrong, because if something goes wrong, it might be impossible to recover.
Now, if it’s one of those people who had a full bank account prior to beginning the business, then it might not affect that person at all. If that’s you, I aspire to be you one day. If you’re one of the people who wasn’t well-off but was able to stockpile cash prior to expanding, please call me, because I’d like to know how. I’m kidding about that, too. Everyone knows I hate the phone. But you could email me if you’d like.
Cash flow dominoes
It might not seem like much to some people, but a missing payment can really mess up things for many people. Missing money has a domino effect: I couldn’t pay my contractors or my bills if clients didn’t come through with payments. My business has been increasing, and I recently took the leap to bring contractors into the castle stable, but being able to pay them is still predicated upon my being paid.
I am ahead of the cycle now and have a month’s money set aside ahead of time, so if something like that ever happens to me again (not likely), it won’t create huge cash flow problems. I hope it will be nothing more than a puff of smoke from Nettie the dragon’s nostril. But at the time that happened to me, I held my breath and prayed that someone would put a check in the mail before the rent and everything else came due. In the meantime, my family and I ate an odd assortment of whatever was left in the kitchen cabinet. We rode out that rough patch hanging on tooth and nail, and a different client sent her payment in time for me to get things paid. A few months later, I was able to set aside that cushion.
How to handle a client who doesn’t pay on time
Fortunately, almost all of my clients have been great about paying their bills. Did I boot the person from my client list? No, actually, but I will be sure that all future work from that person is paid in full before I begin. I normally accept half up front, half upon completion, but if a person shows that it’s necessary to have full payment from them up front, then that’s how it will be. It’s not because of hard feelings, because there are none; it’s just how it needs to be. I’d still be happy to work with that person. Aside from the late payment, it was a quite pleasant experience.
Keep in mind when you hire someone that they are probably depending on that money. Most solopreneurs just don’t have any kind of cushion and a late payment can create cash flow problems for them. Guard your integrity and your reputation, and pay your bills.