So what happens when your client is late in paying you? What do you do to handle this? Biting the hand that feeds you is no way to get more to eat. (Or more design work in this case.)
I recently had a contract client that was late in paying their invoice, and I thought that this would be a good post for my blog. Having expressed in advance that I was a stickler for payment on-time to each of my clients as I sign them, most of them have always been prompt in payment. Typically most companies ask “terms” with each of their vendors, with 30-45 wait periods until payment. But as a freelancer (NOT a vendor), I’ve found that even with the deposit before a job begins, there’s no way that I can give them these kind of terms. I make it clear up front that a check must be cut on completion of the project, and if they won’t agree these terms, I consider walking.
Standard terms for my invoices are 30% down and the rest due on delivery. (When the final project is delivered by email or CD/DVD) It is noted right on my invoice that after 10 days the invoice will be overdue (late) and a late fee will be incurred. My clients appreciate this “grace” period, and most of the time it has not been necessary to add a late fee. But once-in-a-while I’ll be working with someone new who doesn’t know the internal processes of their company, or doesn’t have a good working relationship with their accounting department and things get stopped-up. How do you politely handle this?
Here’s how I went about it this last time: The day the grace period ended (Day 10), I sent an email inquiring about the status of the check, and asked if I needed to submit a new invoice with a late fee included. There were no threats, no “warnings”, I just politely asked if they needed more time by telling them that this “time” would appear as a line-item on a new invoice. The check was ready the following day. I didn’t even have in mind what kind of late fee to charge – a standard amount or a percentage of the total?
As a freelance or contract designer, we get to handle accounting, new business, account management and all those things that are normally handled by another person in a agency environment. I don’t like dealing with the money, I don’t like change orders, and most of all – collection is the bane of my freelance existence. How do you make this a smooth process? What kind of terms you provide your clients and how about late fees? Do you have them?
Brad,
Nice to see you blogging more often. We really should get together for lunch sometime. I’m working in the Riverwoods as an internet marketing coach.
Ok, this hit a sore spot. I now have two clients that haven’t paid me and won’t respond to my requests. Both are new. I don’t care if I ever work for either again. I will also warn my friends not to do business with one of them in particular.
So my question is, one was a few hundred, one was $15 (not much). What should I do? I’m pretty sure I should forget the $15.
This is one thing I hate about contract work and why I have a regular job while I’m building my own businesses. I hate to chase the checks.
Janet
Brad, and Janet —
For what it’s worth, I’ve been on my own as an agency of one for approaching four years. I also don’t like the accounting side of my business. If I were really -good- at math things, I wouldn’t have gone to design school…
But anyway, getting paid is necessary. Here are my basic rules:
All projects, large or small, are estimated in writing. Sometimes this is e-mail.
All project estimates, big or small, must be accepted IN WRITING before work begins. Again, sometimes by e-mail. Just make sure it’s clear… “Mandy, please proceed with project #4033 for the amount of…”
All new clients must pay a deposit, often 20 to 30% of the estimated project total, before work commences.
Invoices are due and payable upon receipt (though in reality, it often takes 30 days).
If you want to grow your business, you’ll have to accept that clients, especially larger clients, will need 20 to 30 days to get your invoice processed, checks cut, and then mail you payment. You must structure your cash flow and your project load to allow for this…
I invoice projects immediately upon completion. Mostly by .PDFs sent via e-mail (no postage for me and simple tracking mechanism). At 30 days, I send a reminder invoice and a note about the possibility of it being lost in the system, etc. I send another every 5 days until I get the check.
In four years, I’ve been fortunate that no one has ever just not paid. I’ve had a few that went 90 days, but the vast majority of my clients pay in 20 to 30 days. I don’t charge late fees, because our business is a relationship-oriented business and late fees don’t work with that message. I would consider them for accounts that go 90 days, though… and for clients you essentially want to fire. Just remember, they have friends, contacts, networks of people they know, too, and some of them might be great potential clients for you.
I’ve had my own share of bad clients. In my experience as a freelance writer, though, the smaller the total contract fee, the more problematic the client. My current client is paying me my new significantly higher rate and there has never been any problems.
Some of my freelance friends hire a “collector.” This is usually a very firm person with a lawyerly demeanor (though not necessarily a lawyer), and they dispatch this person to clients who are negligent in paying their bills and seem to be trying to get out of paying. Most of the time, they say it has worked. But for the clients that have no problems paying up, there’s no need for the collector.
By the way, I would like to thank you for featuring the pixel wallpaper in your blog. I was Googling for possible new backgrounds, and found K10k.net through your blog feature, and now I am perfectly happy with my new elegant pixel wallpaper.