Client Payment Issue

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  • clearThoughts

    We have an issue with an existing client. Wondering what your thoughts are on this, or if you experienced anything similar.

    So we delivered a full campaign and exceeded the allocated production budget, mostly because they asked us for additional elements very last minute...

    However, now that the campaign has been delivered. The client claims that the budget in our contract was capped.

    So a very clear contradiction, but after a week of email exchange they still don't want to pay the final instalment.

    Now we are at a stage that I have to unfortunately get my lawyer involved.

    Finally, the client is based in Asia. Which will made any debt collection even more difficult.

    Does anybody have any experience on anything similar?

  • mekk0

    > Does anybody have any experience on anything similar?

    This is daily business, esp. the extra work means extra $ part.

    Well, did you cap the budget or not in the contract? Was the additional cost approved by the client?

  • clearThoughts0

    The budget was capped, then we got the additional cost approved but it ended up even higher due to VAT from third parties. Overall 5% over from the total overall budget.

    My only point is that they made it incredibly difficult to stay within budget, because of their requests.

  • mekk0

    Try to be businesspeople and negotiate, make a slightly cheaper offer or send an invoice for the approved cost and get your 5% with other projects (when continuing work with them).

    Don't know how much $ is the 5% but sometimes you win, sometimes you lose. I thought they are something like 30% over budget and don't want to pay anything. But from a clients' perspective it sounds reasonable.

    I mean:
    Offer: $80
    Project with additional cost: $100
    Invoice: $105

    I'd want to pay $100.

    They made it difficult to stay within budget but you're professionals and got the task done :-) Just move a tiny little bit and they have the feeling to be great dealsmen - clients love that and will happily accept your 103% invoice.

    • Side note: try not to get lawyer involved unless shit hits the fan. As soon as they are involved, the way of a peaceful communication is blocked and you end upmekk
    • paying the goddamn lawyer also.mekk
  • dpi0

    Probably we are talking a lot of work and expenses here and I can't relate to that as a freelancer however here are some things to think about.

    I agree that first keep the lawyers away. Or consult with them on your side, let them look through your letters and involve them in the process to be protected however don't play that card with the client and tell them.

    If there is open communication line between you and the client you can always figure things out. If they don't reply and there is no communication you can turn to legal side. + I am afraid with legal even if you win there is risk + extra expenses from your side. Is it worth it?

    What I have found out even with bigger clients. You communicated with middle man, some marketing manager, project manager etc. They in many cases want to show off like they are big decision makers and can approve budgets etc. Usually not so much.
    Same time they are responsible for the good outcome of campaign. So during the process they may ask for additional work. Later it can happen that inside of the company they say to their boss that well instead of 50000 they now want 52000. Probably it is not a problem actually however if somebody has bad mood they say NO. And this is the place where things go bad. Project manager can't have argument with his superior or boss. Easier is just to have problems with outsourced agency worst case you lose a partner not your job.

    So what I suggest is that you try to figure out whats the problem. Are they happy with the work? Do you want to work with them again and in near future? I have myself divided some more expensive projects between smaller projects so that it is easier for pm-s to get the approval from board etc. Offer that you go for 100 what was agreed now and add the extra budget to new project.

    Idea of extra 3% instead of extra 5% could be win to. Swallow your ego and lose a bit of money. Art of negotiation is that other side has to feel that they win.

  • monNom0

    If it just the vat that's the issues, it sounds like you misjudged your cost and quoted them too low. From their perspective, you are trying to stick them with the cost overuns after they contracted for a x amount. I'm not surprised they pushing back. How would you respond if the roles were reversed?

    IE: the print job you received is now twice the price because we forgot to factor in labour when we quoted you.

    As for lawyers, if it's not collectible through the law, there's not a whole lot of reason to get lawyers involved. You're just throwing good money after bad at that point. And burning bridges. And people talk.

    The take way from this: In future, always include vat in quotes, I guess, and make certain you mark everything up so you have some wiggle room. Take the hit on this one and make it up on future business.

    • One more: don't release files until you have paymenti in full if there are no legal remedies available to youmonNom
    • In terms of VAT I had it done several times already. I had to pay it at all times, right?clearThoughts
    • Not sure. Your accountant can advise there... maybe you can claim VAT back because it's going outside the country?monNom
  • clearThoughts0

    Damn, thanks for the advice.

    It looks like we did quite a few things wrong already.
    We are talking about 5 to 6 digit numbers here too.

    They already have the files and the campaign is out.
    We own the copyright though, and licensed it for 1 year.

    I just find it atrocious that they ask to put a cap on the budget. Then last minute push us over budget. And now they refer back to the contract. Also, they made us work with a prestigious big name photographer that is known for going over budget.

    I'm going to see our lawyer on Monday, but part of me also thinks if there is a chance of loosing 5% of the budget and getting the rest, it might be better than paying lawyers.

    Additionally, we also have a late payment fee. So if we prove that we are right, also charge them for it.