Your Legal Rights When a Client Won’t Pay, Part 1

We are thrilled to have a guest blogger today! Annette Stepanian, attorney to creative professionals, is here to share here thoughts on what to do when a client doesn’t pay you.

In the wedding industry, we have the great fortune of being paid upfront for services. BUT – what happens for those added hours after an event? Those occasional events where a client goes beyond scope and you need to invoice them? What happens when a client refuses? Annette is going to help us out. (And make sure to check out her contract templates for wedding professionals.*)

In this first part of our 3-part-series, Annette shares how to protect yourself upfront with a strong contract.

The Situation: The Client Won’t Pay

You’ve worked hard planning an event for your client. The event date has come and gone and you now find yourself chasing down your client to pay the balance owed for your services or to reimburse you for agreed upon expenses.

This three part series addresses how to minimize the risk of this happening to you and what options are available should you find yourself in this situation:

  • Because the available remedies are largely governed by the contract you entered into with your client, part one of the series discusses what contract terms and practices minimize the risk of ending up with a nonpaying client.
  • Part two discusses the three dispute resolution options most often included in contracts that will impact how you go about recovering unpaid fees.
  • And finally, part three addresses how to prepare to take a nonpaying client to small claims court to recover your fees.

It is imperative to have a written contract before you begin working with a client. Not only does a contract help clarify expectations between you and your client, but in the event of a disagreement, a judge is more likely to uphold an agreement if it is in writing.

Here are a few terms that should be included in your contracts:

Payment Terms & Schedule

It is important to make your payment processes and expectations clear in your contract. Most planners require an initial deposit before commencing any work, but then have trouble collecting the outstanding balance upon completion of the event. One solution is to not only request the initial deposit, but to outline a billing schedule in the contract. Instead of billing the entire balance at the end of the project, divide your fees into a payment schedule and distribute the payments into several invoices, with the final payment of your fees due before the event date. For each portion of the work you provide, send an invoice and indicate to the client that you will move forward with the work only if the invoice is paid in full.

Also, your contract and your invoices should clearly indicate the deadline for when invoices must be paid (for example, within 15 business days of receipt of an invoice).

Be diligent about sending your invoices at the predetermined schedule and implement a process to streamline this for you. Sending timely invoices and following up on overdue payments communicates that you are a professional and you expect to be paid in a timely manner for your services.

Late Fees for Overdue Payments

One method for incentivizing timely payments is to include a late fees clause in the contract. Although the maximum interest rate that is permitted varies by state, this clause may encourage a client from paying you on time so as to avoid the interest charge or late fee. Another option for incentivizing payment on an outstanding invoice is to offer a discount for paying on time. For example, the client can receive 1.5% discount if the invoice is paid within 10 business days. Again, indicate that all work will cease until outstanding payments, including any late fees, are received.

Document What Expenses Will Be Reimbursed

If you anticipate incurring out-of-pocket expenses related to the event that are not already accounted for in your fees, make sure your contract clearly outlines what specific expenses will be reimbursed by the client. As in the case of your service fees, indicate how those expenses will be invoiced and when such reimbursements will be due.

Despite having reimbursable expenses identified in your contract, it’s also a good practice to run all purchases by your client before personally incurring the cost. Better yet, have your client pay for the expense directly so you can avoid invoicing and waiting for reimbursement.

A Few More Tips

If you’re having trouble collecting your fees from a client even though you have a solid contract in place, here are few more tips on how to address the situation with your client:

  • Periodically send copies of outstanding invoices to the client via email and U.S. mail and follow up with a phone call if necessary.
  • Send your client a cordial, but firm letter outlining the terms of your contract and their responsibility to pay you. Enclose copies of your contract, invoices, receipts, and other supporting documents and state a deadline for receiving payment.
  • Sometimes a client withholds payment because they are dissatisfied with your service in some way. Use this as an opportunity to address their concerns and to provide better customer service.
  • If you’re making little progress, then work with a lawyer who can send a strongly worded demand letter to the client and/or help you pursue other remedies.

Despite taking all these measures, sometimes a client will still fail to pay. Assuming you want to pursue the matter further, the next post in the series will discuss the three most common dispute resolution options: mediation, arbitration, and litigation.

Annette Stepanian is an attorney and creative business owner who helps creative professionals and entrepreneurs lay a legal foundation for their business. To learn more, visit www.annettestepanian.com*. 

Legal Disclaimer: This information is  for educational and informational purposes only; it is not intended as and does not constitute legal advice. and does not create an  attorney-client relationship between you and the author. 

*We receive a small affiliate fee if you purchase your contract from Annette Stepanian. We’d refer her even if we did not.

Is It OK to Fire a Client? When and Why?

When you work in the wedding industry, the success of your business lies in finding and keeping new clients. There may come a day, however, when one of your clients makes you question whether or not the job is worth the effort. (Bridezilla, anyone? Groomzilla? MOTB-zilla?) How can you identify the type of client that just too much trouble to be bothered with, and how do you deal with the situation? If you want to build and support your brand as a wedding business, you need to be prepared to defend it, and that might mean firing the occasional client.

  Trump - You're Fired! from AnimateIt.net

When to Fire a Client

You’ve spent a great deal of time building not only your business, but your brand as well. You know exactly what niche you occupy within the wedding industry, and you have a specific quality of service you deliver to all of your clients. So what happens when one of your clients makes it difficult (or impossible) to maintain that standard of service? For the sake of maintaining your brand, your reputation, and the wellbeing of your business, you may need to direct that client to another company.

So how do you identify the type of client that should be fired? It is quite simple — if working with the client will require you to compromise your brand or your quality of service, it is not worth working with him or her.

Take for example the client who constantly changes her mind about what she wants from you. This type of client is never satisfied and causes you and your staff a great deal of stress in trying to keep up with her latest demands. If working with this client would cause you or your staff to compromise the quality of service, it may not be worth the effort. (It will likely also pull time away from servicing your better/ideal clients.) You may also need to fire a client if she continually refuses to pay or makes late payments, if she is disrespectful to your staff or vendors, or if she expects a level or type of service that doesn’t correspond to your brand.

How to Fire a Client

In order to ensure that you have the option to fire a client if need be, make sure your contract has a clause that allows you to do so. Somewhere in your contract you should state your right to terminate the client relationship if necessary — you should also outline the process for returning the client’s deposit and for receiving compensation for the work you have done up until the point of termination. With these protections in place, your client will not be able to argue that it is completely within your rights to terminate the relationship. (As always CONSULT a lawyer to ensure that your contract allows you to terminate the relationship.)

So how do you go about firing a client? If you have determined that you simply cannot work with this client, you need to tactfully explain the situation and return any money due to them. Write the client an email or letter explaining that you think she would be happier with another company. Do your best to keep the letter civil and avoid putting blame on the client. Simply state that you do not feel that you can meet the needs of the client and that she would be happier with another company.

What are your thoughts on this? Have you ever had to fire a client? Share in a comment below.

Be Sage Conference Speaker: Betsy Butwin, Friedman Iverson PLLC

We are thrilled to partner with a range of amazing speakers for our Be Sage Conference this August. When we sat down to set our curriculum for Be Sage, we asked ourselves: “What are the challenges that experienced business owners have in the wedding industry?” We came up with a list of questions and found the best people to speak on these topics.

Questions:
How do I franchise my business?
How do I license a service or product?

BetsyButwinIntroducing: Betsy Butwin, Attorney with Friedman Iverson PLLC

Betsy works with clients in the wedding, music, and creative industries. She helps entrepreneurs launch their businesses, draft and negotiate contracts, and manage their intellectual property. She also heads Friedman Iverson’s estate planning practice. She teaches intellectual property and contracts at the Institute of Production and Recording.

Betsy will co-presenting with our own Kelly Simants who will be sharing her own experience with the licensing of her wedding planning business, Sweet Pea Events.

3 How To’s you’ll gain from Betsy:

1) How to manage and make the most out of your business’ intellectual property
2) How to navigate and negotiate licensing opportunities; how to legally protect yourself in a licensing relationship
3) How franchises work and what are the legal requirements

We feel pretty strongly about partnering with companies and individuals that mirror and augment our own core values. Here are 3 core values that are fundamental to Betsy and how she does business:

1) Treat clients and co-workers with respect and integrity
2) Do great work
3) Help people pursue their passions

We hope you’ll join us this August!

BE SMART. BE BRIGHT. BE SAGE.

Ticket sales are open for Be Sage Conference.

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Here’s a little refresher if you missed our post last month about our new conference:

We want you to have a deeper business strategy that will take your business to the next level. This isn’t a business theory conference. And, while you will certainly be inspired, we aim to prepare you with actual tools to use in your business (not just a hope and dream.)

We will continue to add conference details at: www.besageconference.com

Greenhouse Loft, Chicago | August 3-5, 2014
Tickets go on sale February 10th at 9am PST

Using Pinterest Ethically, Legally, and *Coolly*

I’ve been privy to a few conversations lately regarding some ‘less than cool’ Pinterest activity. And by ‘less than cool’ I mean… unethical or illegal or just not cool.

Today… I want to invite you all to share with me YOUR thoughts on ‘less than cool’ Pinterest activity. Please leave a comment below… what is NOT cool to do on Pinterest? (I confess. I had to give up my Pinterest addiction years ago in its early phase. I lost 2 much sleep in a 2 day bender. :) I need you to help me out.)

I’ll share some of my thoughts here…

Swapping links for yours (especially if you are swapping with monetized links) – not cool

This happens when someone pins something andpinterest  inserts a link for reference. (The link is to the original blog post and it gives credit to the creator.) Someone repins the pin and substitutes it with a link going to their site – or, worse – a link that has an affiliate code for some sort of financial gain.

That’s not cool.

This is kinda like stealing.

Borrowing’ images from Pinterest without giving credit to the original source – not cool

Pinterest can be amazing at driving traffic to artists’ sites. The flipside is that when stuff gets pinned, it can easily lose the original source information. 1000 pins down the road and this image has now been downloaded onto someone’s computer and revamped for their own purpose.

Pinterest is not a database of free-to-use creative commons artwork. It is illegal to use images or manipulate images found on Pinterest.

That’s not cool.

Always ask permission. (Here’s a cool post that talks more about this.)

Posting Your Work – that’s OK! Just be cool about it.

When Pinterest first began it was taboo to pin your own work. Now, this is a completely acceptable way to share your work. However, keep in mind… like with all social media, if you only talk about yourself, people will get bored. (“I’m so vain.”) Make sure to attribute your work to your business.

What do you think? Are these not cool? What is also not cool? I know I’m barely tapping the surface here and I’d love to get your thoughts!

Pinterest has a great little etiquette page for more thoughts..

Using Licensed Images, Artwork, and Graphics for Events and Parties

I’m taken aback when I see something is extremely prevalent and totally illegal in our industry (and more so in the kids’ party industry). I’m talking about the use of licensed images and artwork for events and parties. Here’s the deal… if you are profiting from the use of any copyrighted images, artwork, or graphics (that you do not have a right or license to use) you are stealing from that artist. If you are a stationer or an event designer who is using images from films, cartoons, children’s books, television, trademarked logos, etc. you are doing so illegally. (Yes, cake designers too! Keep reading.)

Image: Creative Commons License

HA!  WRONG!  Image: Creative Commons License

I’m talking about using any of the following printed on invitations, menus, banners, bunting, hats, etc, etc, etc…

  • Dr. Seuss characters
  • Charlie Brown and Peanuts Gang characters
  • Star Wars logos
  • Hello Kitty and her friends
  • Logos relating to luxury handbags (Louis Vuitton, etc) and other designer labels
  • Logos relating to colleges and professional sports teams
  • and… anything Disney (of course!)… pretty much anything that has a (c) or ™ or (r) after it!

Don’t even get me started on the craziness on Etsy and Pinterest in regards to completely illegal use of marks and artwork. OY!

What the Law Says…

Copyright and trademark laws are in place to protect artists from those that may want to profit from copying their work. (I’m pretty sure you’d want this protection for your business, right?)

Here is the law so that you can get all legal-y with me:

(1) Any person who shall, without the consent of the registrant—

(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

(b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action by the registrant for the remedies hereinafter provided.

What about “non-commercial” or personal use?

Here’s where people get confused and the lines get blurred… if you are hosting a party for your child and use licensed graphics and images… and you are NOT selling anything or profiting from this… you might be OK. The idea is that if you use the image or mark for personal use, you are not gaining any profit. (This does get really blurry tho because some companies do not condone personal use. Your best bet would be to email the artist and/or company and ask for permission.)  The HUGE mistake that is made with the personal use of artwork is when this private party is published on a blog or website. NOW – the party has turned from personal to commercial. Who do you think is profiting? Maybe it’s you indirectly from marketing exposure? Maybe it’s the site owner from the sale of advertisements? Bottom line: if you are using artwork for your personal use, do NOT get it published.

Cake People too!

And, here is something interesting… cake design is guilty of this too! If you are a cake artist who is asked to do Sesame Street characters, you may want to rethink that. This is a really great post explaining the legality of artwork on cake design. The author of this article, Jason Kraft, makes a great point here:

“You may notice many, many examples of infringing cakes posted online by both individuals and businesses. This may be due to people being unaware of copyright law or simply not caring about it, but it does not mean that copyright law is not being enforced. This law exists to protect the investment of people and businesses who spend time and money creating original works of art, and if you create your own original work you would want to enjoy those same protections.”

Be Ethical. Be Honest. Be Legal.

So, what do you do if your client requests this of you? (This is especially hard when your competitor may have this blazoned on their website as something they offer.) One option is to legally license the artwork so that you are free to use it for this event. (Some artists may be more flexible with the use of their images depending on the scope of your work.)

If you are unable to license the artwork (or it is cost prohibitive), then you need to refrain from using it.  The right thing to do is educate the client on why doing this is illegal and unethical. You will gain far more respect and credibility in the industry if you commit yourself to doing honest business.

What are your thoughts on this? Have you been in a situation where a client has asked this of you? Have you had success in licensing artwork the right way?