As freelancers, of course, we love our
work, but we also love to get paid for it.
Getting paid on time can be a problem,
however. In a survey conducted in the U.S. by Freelancers Union, 77%
of members said they’d had problems being paid for their work.
So in this tutorial I’ll give you some
strategies you can use to get paid more quickly. I’ll look at selecting the
right clients to begin with, establishing clear payment rules, invoicing
effectively, and resolving problems.
No tutorial, of course, can protect you
100% from bad clients. You may follow all of these steps and still be unlucky
enough to encounter a scamster, a dishonest client, or a client who simply
can’t pay. But putting these strategies in place will give you a much better
chance of avoiding the fate of the 77%, and instead joining the 23% of
freelancers who happily get paid on time and hassle-free.
1. Select Your Clients
This may seem like a strange place to
start, but in my experience it’s the most important step of all. As
freelancers, we tend to be on the prowl for work all the time, and we don’t
want to turn down a potential new client. But sometimes, you just have to say
“No”.
There are no hard and fast rules for
determining which clients will pay on time and which won’t. But a little
research can go a long way.
Check out the company’s background and
reputation. Has it been around for a long time? Is it big or small? Does it
have a real, bricks-and-mortar office, or does it only exist in the wires of
the World Wide Web?
If you’re working for an individual, try to
research their background in a similar way. What companies have they worked for,
and have they hired freelancers before? Also, do they have a strong online
presence? You can glean a lot from someone’s LinkedIn profile or website—and
people who are active online also tend to be more sensitive to their online
reputations, making them less likely to refuse to pay you and risk being
attacked on social media.
You can also search on forums, ask other
freelancers you know, or do something as simple as typing the client’s name
into Google accompanied by words like “scam”, “unreliable”, “bad client” or
anything else you can think of. Sometimes another freelancer’s complaints or
warnings on a forum or blog post will pop up.
Ultimately, you can never determine with
complete accuracy whether a client will be reliable or not. But doing some
careful research up front will definitely improve your chances. Never be afraid
to say “No” to an offer that doesn’t feel right.
2. Establish Clear Rules
Once you’ve selected your clients, you need
to set some rules.
Choose Your Payment Terms
How and when do you expect to be paid? This
is the first thing you need to establish.
You’ll probably have some general payment
terms, and then some that are specific to particular clients or projects. For
example, you might usually expect payment within 30 days of completion, but for
a very large project you expect to get a third up front, another third on delivering a particular milestone, and the rest on project completion.
Choose what’s right for each project and
each client. Understand that some clients will have their own standard
processes and terms, but also be firm about what works for you.
The payment method you choose will depend
on the banking system and norms in your country, but the general aim is to find
a method that’s widely used, that’s easy to use (both for you and the client),
and that minimizes fees.
PayPal and similar online payment services
are widely used, especially for international payments. Bank transfers and
checks may also work for you, especially for domestic transactions.
Check the situation in your country. Find out which solution offers the lowest fees, the greatest ease of use, and
acceptance among clients. There’s no point in demanding payment through the
lowest-fee service if none of your clients use it.
Communicate From the Start
There’s a time to have a conversation with
the client about your payment terms, and it’s not when you’re sending out your
invoice.
When I was first getting started as a
freelancer, I completed some work for an overseas client, and happily sent off
my invoice providing my PayPal account details. Big mistake.
“We don’t use PayPal,” I was told.
I offered to provide my bank details
instead, but they didn’t do bank transfers either. All they could do was mail
me a check. Depositing that U.S. check in my U.K. bank account cost me a lot of
time, a lot of fees, and an aching wrist from all the forms I had to complete.
The moral of the story? Always talk about
payment terms up front, before starting work on the project. It’s good to offer
a range of options, but it’s important, particularly with international
clients, to ensure that the client can pay you in a way you can accept.
You should also mention your other payment
terms, such as the timeframe within which you expect to get paid, and any
payments that will be due before or during the project. It’s best to solidify
all this in a written contract (see
my earlier tutorial for more help on contracts).
Most of the time, agreeing the details of
payment terms poses no real problem, but if there is any conflict, it’s best to
iron it out early on. That way the onus is on the client to figure out how to
meet your terms if they want the work done; leave it to the end, and the
dynamic is reversed—now it’ll be up to you to accept the client’s terms if you
want to get paid.
3. Invoice Clearly
If you want to get paid promptly, you need
to invoice promptly. As soon as you’ve completed the work, or reached whatever
milestone was agreed, send out your invoice immediately.
More importantly, make sure that the
invoice contains all the necessary ingredients:
your name, business name if
it’s different, and full contact details
the client’s name and address
an invoice number for reference
the date of the invoice
the date by which you expect to
be paid
a brief description of the work
completed
the amount due
any tax details as appropriate
instructions on how to pay
As long as you include all of these
details, and any others that may be specific to your particular business, it
doesn’t really matter which format or template you use.
Personally, I use a simple template that
comes bundled with Microsoft Excel for Mac. (Go to File > New from Template..., choose Business Finance, and click Invoice).
It’s basic, and it probably won’t win any design awards, but it does the job
for me. There are similar templates available in Word and other similar
programs, both for Mac and Windows.
If your business is more complicated and
you have a higher volume of work, you may want to use specialized software or
apps, which often offer additional advantages like tracking your time or
performing other financial functions. There are plenty of apps to do this: just
a few examples include Zoho, Harvest, and Invoiceable. You can also send invoices
using PayPal,
which can be useful if that’s how you’re getting paid and you want to do
everything in one place.
Whichever method you use, be sure to set up
a reminder when the invoice is due for payment. That way you can check whether
the payment came through, and follow up if it didn’t. We’ll look at how to do
that in the next section.
4. What to Do If They Don’t Pay
If you’ve followed the steps so far, you’ve
given yourself a good chance of being paid on time. But sometimes, despite all
your best efforts in selecting your clients carefully, choosing and
communicating your payment terms, and sending out a prompt, clear invoice, you
still won’t get paid. In this section, we’ll look at how to handle that.
Step 1: Pick Up the Phone
Sometimes, especially when you’re working
for large firms, a failure to pay you can be simply down to an oversight or
administrative mix-up. So there’s no need to get aggressive straight away.
Instead, pick up the phone and start a conversation to find out what’s
happening. I find that most disputes can be resolved far more quickly in a
five-minute phone call than a long chain of emails.
Although you’re keeping things informal at
this stage, you do, however, want to be prompt. If you’ve followed the advice
in the previous step and set up a reminder when the payment is due, make sure
you follow up quickly—within a day or two at the most. That way you’re not only
starting the process sooner, but also making it clear to the client that you
take your payment terms seriously.
Step 2: Follow Up in Writing
After you’ve made the call, send a quick
email confirming what you’ve agreed. You can still keep things friendly, but
it’s important to have a record of the conversation, in case problems occur
later. For example, you could say:
Great talking to you today, and thanks for
explaining that the guy in accounts was on vacation. It’s good to hear that
he’ll be back today and I should get paid by the end of the week. I’ll email
you again next Monday to let you know whether I received it.
The wording’s up to you, of course, but the
idea is simply to confirm how things stand based on your conversation, and to
let the person know the date when you expect to be paid (and that you’ll be
following up again as soon as that deadline passes).
Step 3: Deal With the Right Person
There’s nothing guaranteed to slow down a
process like having too many people involved. Particularly when dealing with
large companies, this can be a big problem.
You might, for example, email a billing query
to your regular contact Bill, who emails his boss Janet, who forwards the query
to Sanjay, the head of accounts, who passes it on to Jared, the clerk
responsible for making the payment.
Then Jared replies to Sanjay, who passes
the email to Janet, then Bill, and then finally it comes back to you, a week or
so later, with your original query unanswered, and you have to start the
process all over again.
This may sound absurd, but I have found
myself in almost exactly this situation in the past (only the names have been
changed to protect the not-so-innocent).
Clearly, it would be better just to talk
directly to Jared and figure out what’s going on. You’ll solve the problem more
quickly, and also avoid damaging your relationship with the regular contact that
you work with.
So as soon as you feel there’s a problem
brewing, perhaps even in the initial phone call in Step 1, ask who’s
responsible for processing the payment, and get that person’s contact details.
Then contact him or her directly, only involving your regular work contact
again if you fail to make progress.
Step 4: Be Firm and Persistent
Keep following up regularly, by phone and
email, documenting everything, and trying different people within the
organization if appropriate. Set a reminder after each conversation or promise,
and follow up promptly as soon as each new deadline expires.
By doing this, you’re making it clear to
the client that you’re not going to just “go away”, and that the simplest way
to end the situation is by paying you. There’s no need to harass anyone; just
follow up regularly and persistently.
Step 5: Down Tools
During labour disputes in the U.K., union
leaders would often tell their members, “Down tools!” The workers would put
their tools down and refuse to do any more work until their grievances were
resolved.
As a freelancer, this option is open to you
if you’re not getting paid on time. Whether it works as a strategy for getting
paid depends on how valuable you are to your client, and how easily they can
hire someone else to do the work. But at the very least, it will protect you
from further losses. If the client hasn’t paid for work you’ve already
completed, it would be crazy to do any more work for the same client and risk
losing even more.
You don’t want to invoke this option immediately,
of course. Allow some reasonable time for the client to work through whatever
problems have caused the delay. But if things are dragging on and you feel that
the client is being unfair, then “Down tools” is a perfectly reasonable response.
Step 6: Start (or Threaten to Start) Legal Action
To be honest, legal action is an absolute
last resort for freelancers. You can sue in small claims court, but in many
countries, legal processes are slow, confusing, sometimes expensive, and
generally a huge distraction from the work you want to be doing.
The good news is that your client wants to
avoid legal action too. All of those same concerns apply—and for them there’s
the added worry about reputation. Being sued by a freelancer for refusal to pay
doesn’t look good.
So simply sending an official letter to
start legal action may be enough to make that elusive paycheck magically
appear. If not, keep the process going, because the client may decide to settle
the dispute at some point along the way. The legal process itself is beyond the
scope of this article, because it varies so much in different countries, but
look for help from local trade associations or freelancer organizations, and
try to find professional legal advice that you can afford.
At this stage, you may also want to embark
on other strategies, such as making the dispute public or otherwise damaging
the client’s reputation. That’s also a last resort, and not an action to take lightly or without legal council, but if you’ve reached this
stage it’s because the more reasonable approaches haven’t worked. Use any
tools at your disposal, while making sure not to let your frustration tempt you
into doing things that will damage your own reputation.
Next Steps
Although the tutorial has ended on the sour
note of threats and legal action, it’s important to keep in mind that the
majority of disputes never get this far.
If you select your clients carefully,
establish clear rules around when and how you expect to get paid, invoice
clearly, and follow up persistently, you should end up receiving most or all of
your payments on time.
Doing all this will not only help you avoid
wasting time on unnecessary and unpleasant disputes, but will also boost the
finances of your freelance business. As I wrote in
a previous tutorial aimed at small businesses, a strong cash flow is a
crucial component of business success. Getting paid earlier means more money
available to pay your bills without having to resort to debt, so it’s worth
taking the time to get your payment terms straight and to manage your invoices
carefully.
Do you have other tips or strategies for
getting paid on time? Share them with your fellow freelancers in the comments
below, or on the Tuts+ student forum.