Here’s what you could do to ensure that you get paid.
This post originally appeared onDouble Your Freelancing.
Most freelancers, myself included, tend to be optimists.
We expect that things will work in our favor.
Don’t we all love that high you get aftersigning a new client?
But that sense of accomplishment and optimism can fade pretty quickly.
And it usually fades around money.
Squabbling over payment terms.
As a freelancer, I supported myself, my wife Deborah, and my kids.
You already knowhow hard it is to keep yourself afloat.
It gets exponentially harder when you have a twice-a-month payroll expense.
We couldn’t afford to let our money situation run wild.
Here are a few of the things I learned along the way.
I see many freelancers, especially those new to the profession, who don’t do this.
If you’re billing for time, I like invoicing forone to two weeks of workupfront.
I typically require deposits when a contract is signed.
Invoice Frequently
When I was first starting out, I invoiced twice a month.
You should invoice as frequently as you canpreferablyonce a week.
The shorter the loop between sending out an invoice and getting paid, the better.
before getting paid for your time.
In the United States, many clients still use paper checks.
Send your clients a sign-on-delivery packet that includes a printout of their invoice and a pre-paid overnight FedEx pouch.
Have them put their check in the pouch you sent and place it in the mail.
Any normal business would kill for that little transaction overhead!
My biggest gripe with credit cards are consumer protections.
If they paid you with a credit card, they can issue a chargeback.
Don’t Work Unless You’re Paid
Alwaystryto get paid upfront.
Not just for deposits, but for everything.
That’s the best case scenario.
I once had a client who had booked about half of my team.
They were a good client, and paid their bills on-time.
Mid-way through the engagement they defaulted on one of their invoices.
Our exchange went something like this:
“Brennan, I meant to tell you…
I’m out of money.
But
it’s ok.
I’m talking with some investors this week.”
We had around a large amount of money still outstanding.
My kid’s college money.
Paul
, as the founder you have everything to gain and everything to lose.
I’m not your investor.
And now you’re telling me you don’t have the money."
After this project, I began telling my clients thatwe only work if there’s money in the bank.
Retainers and productized consulting services are like subscriptions.
They’re predictable expenses for your clients and predictable revenue for you.
I never see or pay an invoice.
Likewise, mycoachingclients are automatically billed monthly.
Setup some sort of automated payment system that will draft from your clients account each month.
The payments actually happen through PayPal.
Bill.comallows you to setup recurring ACH payments with your clients.
Always Get it in Writing
Always use a contract!
At a minimum your contract should ensure that:
The client owns nothing they haven’t paid for.
You charge interest on overdue invoices (non-issue if you charge upfront).
You have every right afforded to you by the courts to get that money back.
But if the bank account didn’t have anything in it, I was out of luck.
Also, obvious disclaimer: I’m not a lawyer.
This is all what my lawyer told me and my personal experience.
What I relayed above might not be applicable to you.
(This is also a great time to mandate a pay-upfront policy.)
Of course, if you work alone, you should probably be your own bad cop.
The preferred path is to avoid this altogether by always getting paid upfront.
Are you familiar with invoice factoring?
My first entrepreneurial pursuit was a lead generation company I started after dropping out of college.
What the heck is that?"
And after some Googling and discussions, I learned that they were the business equivalent of payday loans.
You might expect that these companies get a bank loan.
A factoring company is a special pop in of lender that will buy your outstanding invoices at a discount.
There are other companies that can lend you advances based on your historical cash flow.
Here are a few ways to get working capital:
Kabbage.
They’ll look at your past revenue, and lend you money based on that.
They set you up on a fixed payment schedule, and Kabbage’s fees are pretty high.
If you do a lot of transactions through PayPal, this is actually a pretty nice option.
But unlike Kabbage, there’s no fixed payment plan.
They’ll take a percentagebetween 10% and 30%of eachfuturesale until your loan is paid off.
And the origination fee is pretty low, often around 5% of the total they lend.
This is a new service I just came across who are targeting freelancers and agencies.
In closing, here’s what I recommend:
Bill weekly.
Get deposits upfront, and invoice ahead of time.
Use acontractthat guarantees that you’ll get paid.
If you might, live off last month’s profits.
Sign up for hisfree course on freelance pricingto learn more.
Image adapted fromMax Griboedovandbalabolka(Shutterstock).
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