As a freelance translator or a representative of a company in the languages industry, you work with international clients in foreign lands. The nature of our business is international, so your exposure to foreign clients is inevitable. So what do you do when such a client does not pay for services rendered?
It’s a good question which affects so many people. But the answers are not simple. Indeed, many translators and translation companies can share horror stories of how they got ripped off by a client. Sometimes the loss is very painful-thousands or tens of thousands of Dollars or Euro. The damage is not only financial, it can be physical as well. Sleepless nights? Financial stress? Welcome to debt collection hell.
The following is an excerpt from a chat that I had this week with a colleague:
The XXX translation company is scamming me for 7-8.000 euros. I am sending to international debt collection this week. If that doesn’t work, I have a friend who is an ex MMA-pro that weighs 120-130 kgs pure muscle with a bad temper … and as far as i know pretty convincing. I’d worked for them for years .. small jobs .. never had a problem. There were app 100+ files over some weeks .. everything ran smoothly … jobs confirmed and invoices accepted … then no payment. They said, that there were issues with the quality of the translation.
This kind of story is, unfortunately, pretty common. This translator is in a huge bind and is searching for solutions. The part about the MMA collector was, I assume, said in jest and is of course a crazy and stupid idea. But that only goes to prove how desperate someone can become when confronted with bad debt.
The best way to prevent a collection crisis is to avoid it-PREPAYMENT!
At GTS, our standard term is prepayment. Especially for new clients. This solves any collection issue since we get the money in advance. This is good practice for both translation agencies and freelance translators. If a new client orders a job, ask for prepayment. If they say no then you can say no too. If it is large order and the customer does not want to pay the whole thing in advance, ask for a partial advance payment.
Run a credit check
If a customer wants to pay after delivery, check them out first. If it a is translation agency, check sites like Proz and Glassdoor for the company reputation and payment practices. If your client is from another field, run a credit check on them (using BBB, D&B or equivalent). Of just use your common sense. If the company has been doing business at the same location for 30 years, they will be probably make good on their commitment and PO.
Avoid a large debt situation
If a client keeps on ordering and the debt keeps on increasing to a level which can put you in a financially precarious situation, suspend deliveries until the debt is resolved. As any utility customer knows, they will shut off your electricity if you don’t pay your bills for a while. If you default on your mortgage payments, they will eventually evict you from your home. This is common business practice and should be adopted by people in the localization industry as well.
What can you do in a non-payment situation?
Sometimes, even the most cautious business person can get burned by a dishonest company. Or sometimes the company is in financial distress and just can’t pay. What options are available in these types of situations?
Ask for the money (nicely)
This is the first step and should be done tactfully. It will not help to start your collection efforts with confrontation. OK, so with a dishonest company this will usually not help. But if the company has a financial issue, they may tell you that there is a temporary delay and that they will pay you ASAP. These kinds of discussions are better held on the phone and not by letters or emails. Emails are easily ignored and can also come across as being belligerent.
Try to settle
60 cents on the dollar may be better than getting into a fight and being left with 0 cents on the dollar. If the client has complaints and arguments to justify lack of payment, see if they will settle on a partial payment. This will take a lot of restraint on your part, but there are rewards to being pragmatic and having a half-cup full attitude. Again, try calling the client and reasoning with them. If they refuse to answer your calls, then you know you are in a collection nightmare and can go to step 2.
Go to the top
I have found that sometimes you are dealing with a non-senior person who isn’t taking your request for payment seriously. It’s not that the company does not want to pay, just that they are not getting around to it and your contact is being uncooperative. Try to write a letter to the company CEO or better yet, seek out the CEO’s secretary (if it is a large company) and tell her/him your story. This usually gets results. Sometimes, you only need to show your contact the email you are about to send and it will be enough to scare her/him into action.
Using international collection agencies
There are many international collection agencies who can try and collect your debt for you. I myself think that this is a waste of time in most cases. The collection agency has no leverage and what will they do besides ask for the money? It is easy to ignore these agencies. If they ask you for an up-front fee without guaranteeing results, you may end up throwing good money after bad.
This is common practice, especially with freelance translators. They find online translation job portals or go on social media and tell the world how the so-and-so company are crooks and avoid working with them. I find this to be a childish reaction which does little to solve the collection issue. It is more about revenge than anything else.
Some translators seem to take an altruistic approach and say “well I got ripped-off so as a public service I will tell my fellow colleagues not to work with this agency.” In debt collection, the main purpose is to get your money, not to educate the world. Writing nasty things about a company may not only not get you the payment, it may antagonize the other company to a point where they will sever contact with you.
It’s all about leverage-hire a lawyer
I am reminded of a case that we had at GTS many years ago. A client of ours, a very reputable international patent law firm, owed us about $40,000. Weeks and months went by and they were not paying. We sent dozens of emails which were not ignored. But instead of payment, they came up with all kinds of excuses. At one point, the senior partner told us that his firm owed us nothing, since they retained us on behalf of their client. When we asked if we can collect from the client, they said NO!
After we saw that payment may never get resolved, I asked a friend of mine who is an attorney to take care of it in return for a 10% collection fee. One hour after I called my lawyer friend, he called me back to tell me that the check is in the mail. After a few moments of stunned silence, I asked my friend “are you serious?” Yes, came back the reply. The lawyer called up the senior partner and told him that they don’t pay, they would be dragged through the mud. We got the payment within a few days.
Sometimes a lawyer can get you results with just a letter (referred to as a nastygram). A number of years ago a tech company in Kitchener, Ontario owed us a 5-figure sum which was left unpaid. I asked my friend Brian, a respectable barrister in Toronto, to take care of it. He faxed a letter to the company and we got the money wired to our account the very same day!
The lawyer you retain must be in the same country as the client who owes you the money. But as someone in the translation business, you have connections in many countries so finding a decent lawyer may not be too difficult. Asking the lawyer to send a nastygram will not cost you much.
What to do if the lawyer can’t collect? Litigation is costly and can also take years. Another issue with getting a lawyer is that it is usually not worth it for small debts. But as I mentioned, just having a lawyer on your side may give you all the leverage you need to collect.
Avoid any situation which may bury you financially. If you are in a debt collection situation, try diplomacy first and if it does not work then try and get some leverage. If you can’t collect, then just let it go and move on. Nothing is more valuable then your health!
Yes indeed it’s a problem. I ask 25% upfront these days with an electronic money transfer before starting a new job. It seems to help and no more monthly payment. But in reality, we all get burned. I figure a 10 to 15 per cent loss is acceptable. Cheers!