You made the leap of faith and business is on pace to be booming… Terms and conditions are locked, work is delivered, invoices sent and the client goes dark…
There is a harsh reality that most service based solo-preneurs and business owners will face: If you work for yourself, there’s a three in four chance that one day you’ll have to chase a client for payment.
According to reports, one in every two freelancers had trouble getting paid, and 71% cite trouble collecting payment at some point in their career.
An overwhelming 81% of those who had payment trouble said they were paid late; 34% cited instances of not being paid at all.
It’s important for your own sanity that you DON’T act out unprofessionally and DON’t blame yourself or ask ” What did I do wrong?”. You are not in this alone, clearly the numbers show that.
Here are some facts and strategies to help you run the, ahem, “billing department” of your freelance business:
Who Get’s Hit the Most?
What Should You Do?
Manage Your Billing Practices
It’s important to have a system in place for billing because one small unpaid invoice can lead to a mountain of personal issues. When clients do not pay, the results can be catastrophic. In addition to taking up working hours to chase down unpaid income, nonpayment can put freelancers at risk of personal debt. In Freelance Union’s 2014 report, 63% of freelancers reported used personal savings, 44% used credit cards and 37% paid some of their expenses late.
- Talk with your client about “payment schedules and policies in advance” of starting any work.
- Get as much money upfront as terms will allow. 30% – 50% is safe for you and the client who has a concern about getting ripped off themselves
- Invoice early and often.
- Establish your net payment windows. Are you Net10, Net15, Net30? This will set a clear communication of how long a client has to pay an invoice.
Be A Professional
Most freelance engagements aren’t protected by clear, written contracts. If you are in business, act as a business and have your house in order. Although you should not blame yourself for lack of payment from your client, many of these principles apply only if have fulfilled your end of the deal or have set clear standards. Blurred lines in business lead to muddy waters and you will be left with dirt unfortunately.
- Do not “forget” to initiate terms even via a documented email
- Do not “forget” to invoice on a regular schedule
- Be vigilant about following up and communication standards that way your client has an expectation.
- Your research. Find out how well-funded your client is and, to the extent possible, check if there are any financial red flags.
- Bill on a regular basis, and for longer projects ask for milestone payments; they help you manage your cash flow and ensure you and the client are aligned.
- Consider pursuing a settlement in court if your client fails to pay you.
- Work informally. You need a good contract that lays out the scope of the project and the payment terms and ensures that expectations are clear on both sides.
- Be late or inconsistent with your invoices. Make use of tools and apps that automate the process.
- Be lackadaisical about following up with your client about a late payment. If the client does not respond to emails, visit the office in person if possible.