The first tip for telling a vendor you don’t have money to pay them? Never get yourself in the situation in the first place. If you hire someone to do work for you, you need to pay them. If you don’t? They can sue you for nonpayment of services.
That being said, perhaps you don’t have the money to pay your vendor in a timely fashion, but you do intend to pay them when you get the money. Admittedly, I had this issue with paying some of my writers earlier this year when I was chasing down a client who owed me a sizable amount of money for a rather large writing project we did for them last year. The client hadn’t paid me yet, but since I’d had the money in my account at the time, I paid my writers for their work on that project anyway. The problem cropped up when more and more projects came in and I fell behind on getting paid by the clients who were giving us all that work.
So what did I do? I emailed my writing team to let them know what had happened. It was hard admitting that I was actually behind on paying my own bills while I tried to collect payment for this project – it was a communication issue that had cropped up because my contact for the project had left the company before my invoices were paid, and the ball got dropped. I had to track down my new contact and work things out that way…and I kept my writers informed about how that was coming along. We’re a small team that works together really well, so I could afford to be very honest with them. This level of openness obviously isn’t going to work for every business relationship…
So what do you say?
Don’t make excuses that really would be better classified as lies. “The check is in the mail” is an old one that people have heard before. I’ve gotten that line, and I asked what date the letter would be postmarked so I could double-check it on the envelope when it arrived. (Which is something I suggest anyone who is owed money should ask when they get that line.) Unsurprisingly, I was told it was mailed earlier that day so it would have the current date on it. In that particular instance, I would’ve been fine if the check had just been mailed out that day, even after my email. I would’ve gotten in within two days. The lie that really did it in? After being told that my check had already been mailed, the deadbeat client told me a week later that she “took it back” after I brought up small claims court as an alternative. If she had really mailed it, “taking it back” would be a lie, since you can’t go to the post office and un-mail something. Therefore, the check was not in the mail. Don’t tell someone the check is in the mail unless you’ve literally already mailed it.
Give a time frame.
If you have subcontracted work out – as I do with my writers and some of my clients do with me – it makes sense that you will not have the money to pay your subcontractors until you get paid for the work yourself. If your client pays at the end of the month, or within 45 days, or whatever…let the people you have to pay know when you expect that money to come in. The people who owe you money should have the same courtesy, so hopefully everyone can plan their finances accordingly. If the people who owe you money are giving you the run around, consider directing them to this post.
It may not actually be your fault if you’re waiting for someone else to pay you before you have the money to pay someone else, but it is your responsibility to see this through. Apologize for the inconvenience, let them know you will make good on it, and as long as it happens in a reasonable timeframe, it shouldn’t become an issue where people start talking about court and lawyers.
If you do it wrong?
If you lie and jerk people around when their money is involved, sooner or later, someone is going to come after you. And then your reputation as a nonpaying client is going to become a matter of public record. And if you bounce a check to someone because you wanted to shut them up with a check after they’ve been trying to collect from you for weeks – but you know you don’t have the money to cover it – that’s illegal. There’s a really helpful form your vendor can file with your bank called a Certificate of Protest and Notice of Dishonor. It is a legal document that gets filed stating that you wrote them a bad check and they intend to collect on it. In my area – I believe the time period is 10 days – after that time period, if the debt has not been paid, the vendor can report your nonpayment to the police… And a warrant will be issued for your arrest. And you can believe that your vendor will be watching the local news sites for the arrest information to be published so they can share it with their colleagues. On Twitter, Facebook…anywhere and everywhere. Then you’ve got an online reputation management nightmare.
But that is a lengthy and annoying process that no one wants to actually pursue unless you have given them reason to believe you’re trying to screw them over. So if you’re upfront with your vendors about your finances, you’ll avoid all of the unpleasantness. People can often be more understanding than we give them credit for – although their landlord and electric company may not be. That’s why it’s important not to lie and say the money’s coming when it’s not. People need time to make other arrangements in order to pay their bills – drawing from a home equity line of credit, borrowing money from family, etc. They may not be happy about it, but as long as you’re not springing this on them when your check bounces (and then their checks bounce, and they incur ridiculous bank fees) you probably haven’t made it onto the permanent naughty list.
Moral of the story? Always pay your vendors. Try to do it on time. Fess up when you can’t. You really don’t want us to see your story on Judge Judy.