Managing Difficult Clients: A Guide for IT Suppliers Dealing with Non-Payment Issues

As an IT supplier, your focus is on delivering innovative and technically complex solutions. However, despite your best efforts, you may occasionally encounter clients who become problematic —particularly when it comes to settling their bills.

Common Triggers for IT Services Disputes

In our experience, there are certain scenarios that commonly lead to disputes over payment or performance in the IT sector:

• Misunderstandings About Project Scope - it’s not uncommon for clients to have unrealistic expectations about what the project entails or how quickly it can be delivered. When the final product doesn’t match these expectations—often because of poor initial scoping—they may refuse to pay, claiming the work is incomplete or off-target.
• Perceived Service Shortfalls - even when your team delivers what was agreed upon, routine services may not meet the client’s expectations. This is particularly true in cases where the software’s impact isn’t immediately apparent. Clients might withhold payment, citing employee frustration or internal disruptions, rather than any tangible financial loss.
• Project Delays - delays are a common pain point in IT projects, especially those involving new technologies or complex integrations. Delays in delivering key stages of a project can frustrate clients, particularly if they feel these delays are unjustified or negatively impact their business. This can lead to claims of breach of contract and a refusal to pay.
• Disputes Over Software Functionality - in cases where the software delivered is seen as buggy, incomplete, or not as specified, clients may argue that the product isn’t fit for purpose. These disputes can escalate quickly if the client perceives that they have not received what was promised. This is especially true where a client’s business is dependent on the timely rollout of the software.

Proactive Strategies for Managing IT Contract Issues

Dealing with a difficult client who refuses to pay can be challenging, but there are steps you can take to protect your business:

• Clear Contractual Terms - from the outset, ensure that your contracts are crystal clear, particularly regarding payment terms, project milestones, and what constitutes acceptable performance. In our experience, careful drafting can prevent many disputes before they arise and leaves no room for ambiguity.
• Communication - maintain open and regular communication with your clients throughout the project. Keeping a client informed of progress, setbacks, and adjustments helps to manage expectations and reduces the likelihood of misunderstandings. From a legal standpoint this provides a clear record should disputes arise later.
• Dispute Resolution Mechanisms - include dispute resolution clauses in your contracts that outline how disagreements will be handled. We can tailor your contracts to include dispute resolution mechanisms specifically suited to the IT industry such as expert determination for technical disagreements, or phased mediation. Instructing Gannons to draft these clauses will allow for clear and well-managed relations and will facilitate a faster resolution in the event of litigation.
• Legal Recourse - if all else fails, be prepared to take legal action to recover payments. In the IT industry, where projects are often time-sensitive, demonstrating a readiness to protect your rights can encourage timely resolution. We have long-standing expertise in assisting clients through litigation and are equipped to handle IT supplier disputes.

How Gannons can help you

Have you got a client withholding payment or are you considering entering into a supply agreement for IT services? Contact us to ensure your contracts are solid, your rights are protected, and your business continues to thrive.