Want no-BS insights on building a highly profitable freelancing business?
✓ FREE 5 Day Course on Winning Top Paying Clients
✓ Q&A - Send In Your Questions, I Answer Them Here
✓ LIVE Webinars
✓ The Chance to Win a FREE Coaching Call
I guarantee 100% privacy. Your information will not be shared
The main thing that you as a freelancer get out of the relationship is, of course, payment. Sure you might be getting exposure, experience, and learning new skills, but seriously – payment tops it all by miles.
There seems to be this loose idea in freelancing circles that finding dud clients who never end up paying is part of the experience. I disagree.
Payment problems can quickly turn the best of relationships sour, and afterwards, it’s very difficult to get back to the working relationship you had before. Payment problems show up in a variety of different ways.
Payments are Late and Require Prompting
This can be unpleasant, annoying and possibly a sign of a bigger issue. Catch it early and very politely let the client know that it isn’t OK. If you don’t want to come across as too blunt or untrusting, blame it on the accountant!
“Hey …, I was just checking in on the status of my invoice 12345. We agreed on weekly invoicing but I haven’t seen it in my account yet. (My accountant’s on my back as usual about regular payments!). Can you let me know?”Image Credit (CC)
Don’t worry about how believable is it – even if your client doesn’t believe your accountant is on your back, hopefully he’ll take it as the gentle and friendly reminder that it’s intended as.
If you notice this happening more often, it might be worth a quick chat with the client to find out what’s going on. Maybe the invoicing cycle can be adjusted, or maybe you move to an online billing platform like Upwork.
Excuses Start Coming for Why Payment Hasn’t Been Made
- Check is in the post
- Forgot online banking PIN number
- Lost online banking key-fob
- Miscommunication with ‘accounting department’
- Travelling and have no access to make any payments
- Sent the payment to the wrong person by mistake. Need to wait until it’s back in my account to send it to you
- I tried to ring you but couldn’t get hold of you
- The accountant wasn’t in this week
- Personal problems
Seen it all, heard it all. If it happens once or twice with a previously good client, give them the benefit of the doubt. When excuses start to stack up into more and more of an implausible story, it’s time to think again.
I suggest trying to stay detached from the stories in cases like these. In my mind I know that when I’m working on a weekly basis, we’ve agreed a week to clear the invoice. At the end of that week I’ll send the client a reminder. I’ll then give the client a maximum of one more week (and 2 more reminders) to clear the invoice before I let them know that I’ve had to stop work as I haven’t been paid.
It’s particularly difficult to stay detached when the client starts bringing personal problems in as the reason for non payment. I don’t want to sound like a jerk but it takes 5 minutes to pay me for the work I’ve done.
Ultimately, I don’t really care what the situation or client’s story is for why he hasn’t paid – these are my terms.
Flat out honesty – “I can’t afford to pay you right now, can I pay you at the end of next month?”
If a client tells you that he just can’t afford to pay, but will be able to in the near future, you’ve got two choices.
- Stop work immediately and wait for payment (possibly adding interest if allowed)
- Keep working and trust that the payment will arrive.
It’s easier said than done, but after about 12 years at it I’m telling you to stop work.
I’ve made the mistake over and over of letting the account balloon. On top of that, I’m usually freelancing on networking/systems development type projects – if I just get up and walk away it’s going to definitely impact the client’s business through delayed software release cycles, bug fixes, etc. I’d even feel guilty, because at least the guy was honest and let me know he couldn’t pay!
I remind myself now, that it’s not my problem. I can either be a “nice guy” and keep working for free, or a “smart guy” and focus on my business and income.
On the 3 occasions that this has happened to me, I have continued to work. Guess what? Another month later when the outstanding bill had doubled, I still hadn’t been paid. I have let clients run up ridiculous bills (from $4k to $18k in the past) and I will never make that mistake again. On the surface, the client might appreciate your understanding. Subconsciously though, you’ve seriously devalued yourself in your client’s eyes. And afterwards? The client didn’t double my rate, thank me for being such a great guy or feel forever indebted to me. No, in all 3 cases, we had to work out a “settlement”, where the client effectively told me how much he was going to pay to walk away from the debt. What did I have to negotiate with? NothingImage Credit (CC)
Clients almost always have ways to get you paid if they really need to, even if they’re in dire straights. Go get a credit card, bank loan, loan from a friend or family or remortgage.
Upwork are consistently criticised for taking 10% fees for “nothing”, and providing awful support when you need it. I disagree – giving up 10% to know that the hours you work are guaranteed to be paid by Upwork can be an absolute blessing.
A Great Job is Only a Great Job if you Get Paid!
Once we get X, Y and Z done (12 weeks of work), we’re going to bring 10 new customers on board. We’ll then increase your contract to 20 hours per week at $120/hr long term. In the mean time, we’ll issue you with credit notes for your work.
What a great opportunity! 20 hours at $120 is $2,400 per week. Chances are, it’s never going to happen. What’s guaranteed to happen though is that you’re going to be working at least 12 weeks for free. Your client’s credit notes are nothing more than a promise. At the end of those 12 weeks, when just another 6 more weeks is needed, what then? Keep working for free, or walk away with nothing? As before, let your client go to his bank, credit card company or investors to take a risk with his venture – not you. You need to get paid!
A small IT company approached me a few years back with an impressive list of work. When it came to agreeing payment terms, they were only insistent that they pay the entire sum after each project was complete. I tried to explain that it would be totally unworkable for me. It would be be terrible business practice for me to work on credit with everyone that came across my profile.
They weren’t interested, and the IT manager said something along the lines of, “we’ve had too many failed projects through working with contractors and need to be able to negotiate payment if we’re not satisfied.” Great! So you’re going to approach this relationship, colored by all your other failed (and probably badly managed) projects, and you’re giving me advance warning that you’re already planning to dispute my work afterwards! No thanks.
Protecting Yourself From Payment Problems
A lot of the ways you can protect yourself come down to what your relationship is like with the client, and what niche you’re working in. I’ve worked in different ways for different niches. You’ve got to try and strike a balance between keeping yourself protected, being smart, and not being impossible and unpleasant to work with.
If it’s a very defined and short term requirement (a 3 day website security test), and I’ve never worked with the client before, then I’ll require the full payment up front. I can’t be chasing down payment from random people online that I’ve never met and have no recourse against. At most, I’ll let the client negotiate 80% in advance and 20% on completion.
With longer term and more variable projects, I’ll invoice weekly and the invoices will need to be settled pretty much immediately before I continue. If the client’s accounting practices mean that invoices need 7 or 14 days before they’ll pay, then I’ll need to invoice in advance for the expected amount of work, and then adjust the invoice at the end of each week to suit.
I won’t work for a new client who wants 30 day or 60 day payment terms without a deposit or other protection. It’s just not worth the risk, and as I’ve said before – I’m not your free line of credit.
For longer term clients (several years), I don’t mind if we move into monthly billing. Especially where they have a solid business and we have a good relationship. I’m still always mindful to chase down invoices as soon as they become overdue. Even with the best of intentions, clients can go bust, and I don’t want to be the guy at the end of the queue holding months worth of debt.
Lastly, A Word on Contracts
Obviously I’m not a lawyer so take this with a pinch of salt, but here’s my take on the value of a contract. It’s important to have one in place, but don’t overestimate the protection they offer. A contract is only valuable if it can be enforced. In my case, I’m a UK citizen and the majority of my clients are US citizens. If a client were to leave $10k outstanding, then unless I’m willing to hire an international attorney to pursue them through the court system, my contract is worth nothing. It’s probably going to cost the $10k just to file the relevant documents and schedule a hearing. And who knows how far it goes after that?
Staying protected starts with a contract but ends with practical business processes that avoid a client account getting out of control.
If clients consistently play games when it comes to payment, it’s a good reason to start re-evaluating.