A few weeks ago, a commenter asked me to address how freelancers can deal with slow-pay or no-pay clients. Seems like we've tapped into a trend, based on today's Wall Street Journal article titled "Freelancers' Guide to Getting Paid--on Time" [subscription required*]. The WSJ article cites a stat from the Freelancers Union that 77% of their members have clients who didn't pay at least once. Frankly, that seems low, unless a lot of their members haven't been around very long.
In any case, their first few solutions are what I use for my own business--no rocket science, just common sense: Don't be embarrassed about asking for what you're owed, try going straight to accounting if you're getting a runaround, withhold future work (politely but firmly), and offer alternative payment plans (two or three installments, for example).
The other three solutions, however, come with caveats. "Consider adding late fees," as the author admits, may get you labeled as high maintenance. "Consider working with freelance-liaison firms" is all well and good if you want to go the Guru or oDesk route, but as I've said many times here, I don't. And the final solution, "Sue the company in small claims court," isn't something I particularly want to get involved in. Mercifully, I've never gotten skunked on a job large enough that would have made it worth the money and psychological capital to pursue.
Here's the deal: The riskiest job is the first job you do with someone, particularly in a crappy economy. So, some suggestions in addition to those above...
- Be realistic. If you're soliciting new business now, you need to accept that there will be flakeouts. I experienced it in 2000-01, the same thing is true now, and it's part of being in business for yourself. Don't spend the money before the check has cleared.
- Request a deposit on new jobs and on existing clients who have had payment challenges in the past. This serves a tri-fold purpose: 1) It gets you some money upfront, 2) it confirms that the client is serious and 3) it provides some negotiating leverage. If someone won't agree to pay a deposit, that is a major slow-pay/no-pay warning sign.
- Be patient. The best way to ensure you get paid on time is to work for people with whom you've developed a business relationship of trust. There are no shortcuts.
I was hoping to find a guy wearing the traditional barrel-and-suspenders outfit for today's clip art, but no luck.
*The Wall Street Journal is the only online subscription that I pay to receive, and it is absolutely worth the $103 a year.
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Freelancing isn't a paycheck, it's a business. Anyone who forgets that probably belongs in an office.
ReplyDeleteGood points, Jake. You're right, being your own collections agent is part of the joys of freelancing. And you're absolutely right to consider the future of the relationship and your reputation before taking some actions.
ReplyDeleteI would suggest a couple more ideas: Subcontract the collections part to someone cheaper than yourself. It gets you out of having to make the call yourself, and provides a distinction for your clients so they don't see YOU as the big bad collections agent.
And second, get a contract — and write it yourself. (Or with a lawyer's help.) So many contracts are designed to protect the client. Why not have something that helps protect you. It demonstrates professionalism, and if the client is unwilling to sign it, it can be a red flag from the beginning.
PS — Agreed. The WSJ is a worthy read. :)
Stephanie, I haven't ever tried farming out collections, but that is an interesting approach if used judiciously. Might try that next time the need arises! And contracts are absolutely another way of gaining commitment and/or flushing out potential problems. It's all about prevention.
ReplyDeleteAnon, I don't believe people always have an appreciation for that when they get into freelancing. They think, "Oh, I get to be creative and the client sends me a check!" Eventually, you either learn the lesson or you probably end up back in the corporate world.
FWIW, I've had luck sending a certified letter with a (regular mail) copy CCed to my lawyer. Makes the point that you are serious without getting into the expense of really going in the lawsuit direction.
ReplyDeleteSteph T., that's another solid idea. Maybe I should hire you guys to be my collections subcontractors.
ReplyDeleteI knew there was a reason I posted about this topic!
Olá amigo! O teu espaço é muito bonito, porém se colocares um tradutor ficará mais fácil de entender e comentar.
ReplyDeleteAbraços,
Furtado.
I only had one late-pay client (and freelance isn't my main income, so it didn't hurt as much). It was such a royal pain to send 3 emails after the over-due date, and you just knew the owner was making accounting stall where it could. Luckily I had friends there and didn't feel too bad sending reminders.
ReplyDeleteWe have one client at the agency who's signed invoices and is now suddenly refusing to pay. They even sent a blank cheque to buy time. Going to court is so costly and time consuming that we may well write it off. Too bad--we did some good work with them. They've just gone money mental...
Teenie, you've illustrated an elemental problem for a lot of creative freelancers, which is that you get put in a position of "feeling bad" about sending reminders. Last time I checked, my electric bill, Visa bill, doctor's bills, etc., aren't particularly apologetic. Now that you mention it, this may be a good topic for a future post. Thanks!
ReplyDeleteAnd sending a blank check? Verrry clever move...funny, I don't remember reading about that particular business technique when I was getting my master's.
Getting paid is a big problem for freelancers and other entrepreneurs. I had this problem so many times that we created our own software application to help "nudge" clients into paying on time- We collected an 3 year delinquent account for $4K the first time we used it, so we decided to spruce it up a bit and offer it to the public as a free app-- sorry for the promotion here, but I think most freelancers will find it very helpful and we welcome any feedback on how to make it better.
ReplyDeleteWe also launched an iPhone app, so you can collect on the fly. If you want to try it, go to www.fastdue.com. Hope it helps your business as much as it did ours.
Thanks
Mark Deuitch
Founder Fastdue.com