This is an excerpt from the brand-new ebook from Bonsai, The Guide to Freelancing. Get it free here.
The sooner you accept that a significant chunk of your freelance time will be spent dealing with invoicing and payments, the more prepared you’ll be to handle them appropriately and promptly. The truth about asking for money is that it’s harder to get paid when more time has passed.
If you want to be sure you get 100% of your client payments, having a process in place to collect them seamlessly is key. If you make it hard for clients to pay, they just might not.
Established freelancers know that the following strategies can greatly impact your accounts receivable and result in a higher percentage of on-time payments.
“If you make it hard for clients to pay, they just might not.”
Understand why payments aren’t being made
As freelancers, it’s easy for us to assume we didn’t get paid because a client is “bad.” They don’t value us, we think, or they are devious and never planned on paying. The reality is much less sinister (and easy to solve).
Understand the reasons for late payments before you start work on a project, and anticipate that they may occur. Then write those terms in your contract before you begin so that there’s a solution already in place.
Why clients don’t pay
Despite your best efforts, sometimes people don’t pay up. Why might a client pay late? Here are some common issues:
Their accounting department didn’t get the invoice
Solve this problem by knowing up front who gets your invoice and any relevant info you might need to include. (Do you need a purchase order number? Is there a special code needed to indicate your project? Are dates necessary? What special information is needed to process each invoice?) Ask about things like W-9s, which should be on file at each client. Know if they will need bank account info for direct deposits, for example.
You made it difficult to pay
Do you only accept PayPal? Are you not able to take US payments? Do you charge excessive fees to process credit cards? These are all good questions to ask before you start work. Remember that you want to make paying you as easy as clicking a button. If an accounting department has to jump through hoops to make payment, they may decide to set the task aside for later, making your chances of payment much lower.
“Before you begin work with a client, know who gets your invoice and any relevant info you might need to include.”
You didn’t communicate
What are your expectations for payment? Do you need payment upon receipt? If you have a request for half up front and half upon delivery, make sure they know this (and it’s in the contract). Perhaps you think they haven’t paid on time, but they aren’t even aware that the due date has come and gone. Over-communicate the terms of your agreement to prevent these mistakes from ever happening.
You don’t understand payment types
Did you know that traditional EFT (electronic funds transfers) can take up to 2-3 business days? Did you know that your bank can choose to hold anything above $200 for confirmation before releasing it to you? There is quite the difference in how fast you can get your hands on payment made through credit card vs. check, and even if the client pushes the big red “pay” button, you may not see it for up to a week. Know how each payment type works, and give allowances for each. International clients will have even more of a delay for most payments.
The best way to ensure payment
The most useful tip for making sure you don’t spend an enormous amount of time and talent on a project—only to get no payment—is to work and bill in milestones. There are several advantages to this method, but here are the most common:
You can stop when you want
If a client refused payment or gives you a bad check, you can finish up your existing milestone and refuse work on the next until things get rectified. Since payment coordinates directly with each stage in the project, you are protected to a degree. You will never be out more than one milestone’s worth of work if the client abandons you at any point in the project. (Since the most valuable milestones are near the end, such as file delivery, there is a big incentive for payments to resume if they want anything of value from you.) This is a major way to reduce risk in your work on any project.
“Freelancers should work and bill in milestones.”
You can demonstrate value
Often, it’s hard for the client to see all that you do when you send them a final file of your work. By using milestones, you not only make sure you get paid for every step of the way, but you are also ensuring that they understand all the steps involved. When they make a payment for a milestone, they are acknowledging what you did, and they slowly realize a perceived value that can grow over time.
It’s easier to swallow
If you quote a client thousands of dollars for a project, they may gulp and disappear. It’s hard for small businesses and startups, especially, to fork out big bucks for even the best work. By breaking up your work—and the resulting fees—into manageable chunks, it gives the client time and perspective to make payments that are more in line with their budget. Just like those as-seen-on-TV commercials, presenting the option of “four payments of $1,250” seems so much better than a huge bill for $5,000. While you are doing this for your protection, they may see it as an easy way for them to pay and make a budget.
Perspective is a major component of getting paid on time. If a client thinks you’re easy to pay and thoroughly feels a value from working with you, they will be delighted to hand over the check. That doesn’t mean that there won’t be outliers who try to take advantage. With these tactics, however, your loss (if any) will be minimal—even when dealing with bad players.
Read the rest of this ebook
The experts at Bonsai have put together a free ebook to help you succeed, whether you’re a designer, developer, photographer, marketer, professional dog-petter—you name it. The Guide to Freelancing is packed full of tips on establishing your business, finding clients, creating contracts, getting paid on time, and much more. Get it now.
A designer, marketer, innovator, and writer. Preethi is the happiest when she helps bring impactful ideas to life.
by Matt Brown
Matt is the founder of Bonsai, an automated contracts and invoices product used by 40,000+ freelancers and agencies globally. He lives in San Francisco, where he enjoys surfing, science fiction, and leafy green vegetables.